How to "Refinance" in the BRRR strategy in less than 6 months!!!

Question

My lender states I need to show rental income on my taxes before I can refinance my investment property. Since I purchased it in December it won't  show until next year.

How do I get around this? I hear investors say they refinanced in 3 to 6 months using the BRRR strategy all the time. Surely they can't be waiting until they file their taxes to do so.

What mortgage product will allow me to quickly refinance? There are no limitations (pre-payment penalty) on my existing mortgage. So I'm not sure why I have to wait so long. Does the quick refinance only apply if you purchased your investment property in cash? I've heard investors state they have refinanced hard-money loans in a short period of time. Does this not apply to a good old-fashioned investment property mortgage?

Thanks in advance!!!

Ryan Deasy · Answer

@Kathy Lowery alot of conventional lenders will require this. in my experience, you may get slightly better terms waiting and going with a lender that requires this seasoning period but, for me, i do not usually like to wait. some of the not-so-conventional lenders will bend on the seasoning period. happy to share more info and contacts

Eliott Elias · Answer

Get a lender that has a DSCR product that allows for a 3 month seasoning period. I can put you in touch with my lender if you’d like

Ryan Taylor · Answer

I find credit unions to be most benificial...they are "in it" to help the share holders...not the big banks...got a HELOC at prime + .5 ...not too bad

Steven Foster Wilson · Answer

How many lenders have you called? When I am trying to buy, sell, refinance, or HELOC, I call 10-20 lenders. I find comparing rates/terms always gives me more options. Keep searching and asking.

Kevin Woodard · Answer

I like to think that things happen for a reason. Is there a pressing reason for refinancing into a long term loan right now? If not, waiting could be beneficial considering current rates, historical trends with fed action in recession territory, and current economic trends.

Specific to the property did you do any construction to it? Did you finance the purchase or purchase with cash?

Deon Knott · Answer

@Kathy Lowery I would try shopping around with other lenders.  I was in a similar situation where I had a property under contract using seller financing/land contract.  I'd be losing money or breaking even at best under the LC but, with traditional financing the property would cash flow great. So I needed to get out soon. Quicken/Rocket, who many consider much less creative and flexible than most other lenders was able to refinance once I reached six months of ownership. That was late 2020/early 2021. Short story long, if Quicken can do this I expect that other lenders would have similar guidelines that would benefit you. Hope this helps.

Samuel E Randall · Answer

Interesting notes taking here! I hope it works out great for you!

Henry Lazerow · Answer

The rental income shouldn't matter, it's just a rule with most (conventional) lenders 6 months wait until a refi. If doing hard money/private money just shop around a bit but I have a feeling the professionals with lower rates will all want 6 months as that is the norm. Theres probably some high interest hard money type places that will do instant. Also as mentioned above maybe look into a HELOC a lot of my clients do that and I have one too, there is no wait time for a HELOC.

David M. · Answer

@Kathy Lowery

Regarding using rental income towards qualifying for a loan, some lenders will use expected rent schedule since you are just starting.  This isn't a requirement of the Fannie guidelines, so lenders have leeway on how theydo their underwriting.  Also, I've found that some loan officers just don't know and its not really a company policy.

"seasoning" of the loan is a two part restriction.  First, Fannie guidelines / requirements don't allow action on a Title within 6 months.  Second, the financing market needs/wants you to keep the loan for 6 payments.  If you extinguish the loan within 6months, the lending and the loan officer lose the money they made on the deal and even have to pay penalties.  So, for a conforming loan you really need to keep it for 6 payments.  Also, since the Title needs to "stay settled" for lack of better term for 6 months, even if you purchased the property with cash you aren't supposed to be able to get a loan on it.

Non-conforming loans such as HML don't need to follow the Fannie guidelines.  Its a cost/benefit issue.  If you want the "cheapest" money, you go with a conforming loan and live with their restrictions.  If you pay the higher rates and additional points for non-conforming loans, you don't necessarily have those restrictions...

Does that help?  Good luck.

Brandon Beardt · Answer

Hi Kathy, many business purpose lenders will allow you to cash-out refinance within their required title seasoning period (typically between 3-6 months) without having to wait until they report on your tax returns. These business purpose loans have different qualification metrics than full-doc conventional programs. This type of financing (Non QM) includes programs such as bank statement loans & DSCR loans - programs I'm sure you've seen being mentioned throughout the forums as their popularity has increased drastically. If you choose to stay the conventional route, it seems like you may have to wait until it shows on your taxes (according to your lender) in order to do the cashout refi. If were to go the Non QM financing route, the rates will be higher, but it seems like you'd be able to utilize the cashout refinance much sooner. I'd say talk to a few different lenders to get a better sense of what you'd be able to accomplish based on your goals & current situation. Best of luck!

How to "Refinance" in the BRRR strategy in less than 6 months!!!

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