Seasoning on Non-Rehab

[Alex V.]

Hi BP,

My partner and I just came across a great off market deal and one of our decision drivers is going to be how long we have to take a private loan out for. We are going to have to buy all cash, and are going to use a private loan in order to fund the purchase. The property is in great shape so we aren't going to be putting much, if any, work into it. If we want to put a mortgage on the property, would we need a seasoning period even if the property isn't going to be rehabbed and stabilized? One wrinkle is that the current tenant is month to month and is paying below market rent by roughly $200-300 a month.

The Property;

• SFR in Lee's Summit, MO
• Original house burned down and was fully rebuilt in 2007
• Current tenant is month to month and rent is well below market

The Structure

• 50/50 split with a partner
• Will likely need a commercial loan as we are going to be borrowing with an an entity

The Plan

• Purchase property with a private loan all cash @ 10%
• Get current tenant out, maybe do some minor cosmetic fixes, paint, landscaping, cleaning, etc
• Re-rent at market rate
• Refi out the private loan

Assuming a perfect environment where we get the tenant out on day 1, and get the property cleaned up and rented in 1 month, would there be a year seasoning period? I'm guessing this probably varies greatly depending on the lender, but I am curious if the concept of a property being stabilized for a year is more for major repositioning or if it applies to any deal purchased in this manner.

[Harjeet Bhatti]

When you are using HML you have to wait 6 month to cash out on market value. If you are using personal loan you can cash out any time but not more than what you spend initially on the property.