You probably DON'T need to wait 6-12 months to refinance...

[Nelson Barss]

I want dispel a myth that I hear repeated quite often on BP and elsewhere... this seems especially important for folks looking to use the BRRRR strategy...

Here's the myth:  "Investors must always wait 6 to 12 months to refinance a newly acquired property onto a conventional loan."

In my experience, this is not true.  You can refinance immediately in most cases.  

The rules are different depending on whether you paid cash or used a loan to acquire the subject property.   Without trying to be exhaustive on all the details, here are the basics:

If you paid cash 
(including borrowed cash from HELOCs on other properties, lines of credit.)

• You can "cash-out" up to 75% LTV (70% LTV for 2-4 unit properties) immediately. (This is done using Fannie Mae's "delayed financing" exception. 

If you got a loan
(including hard/private Money, etc. w/a lien on the subject property)

• You can do a "rate/term" refinance (no cash-out) immediately up to 85% LTV. (2-4 unit properties are limited to 75% LTV)
• You can do a "cash-out" refinance after 6 months of ownership seasoning

Keep in mind that during the first 12 months, the LTV is going to be based on the lower of the purchase price or the appraised value.   However, if you can document rehab costs to justify the higher appraised value in the mind of the underwriter, you can use the APPRAISED value to calculate the maximum LTV as soon as the rehab is finished.

Hope this helps a few of you out there!

[Joshua D.]

Good Info!  Its great to see how there are other options out there!  

I think the main reasoning for waiting the 6 month Minimum is to get ALL your cash back. For those folk with deep pockets who can keep putting 15-25% down on each house that is no issue but for those of us with limited funds the 6 month waiting period can be worth holing out to get 100% of the original investment back. 

We have done this successfully about 4 times now and it works well for us. I want to be able to have a minimum of 25% equity in the property when I get done with the deal and still be able to refi all my money out.  It takes finding a good deal and in the end you can keep growing as much as possible and still have a safe margin of error if the market corrects. 

SO its not that we cant refi right away its that we cant refi and get 100% back of that low interest fixed rate debt.