Investor · TX · Member since 2015 · 119 posts · 40 votes
Hey all,
I was wondering if anyone had any experience with refinancing a property as fast as possible after closing. In my area cash buyers are dominating and its hard for my offers to compete. I was thinking of doing cash offers with hard money and refinancing into a conventional mortgage ASAP. I would have enough cash to pay of the rest of the hard money loan even with 30% equity in the property.
I want to do this strategy for long term rental on multi-family. Im willing to eat a few months of negative cash flow if ti gets me the deal.
tldr: How quickly can one refinance out of hard money lending
Lender · Nationwide Lender · Member since 2015 · 1k+ posts · 814 votes
10y
@Account Closed If you looking to get a loan based on the purchase price, then you can do a Delayed Financing right away. Delayed Financing is available up to 6 months from purchase date.
If you are looking to do rehab and get get loan based on ARV, then you have to wait for 6 months.
An close alternative to hard money would be to get a Fully Approved Loan. This is not your typical pre-approval. In this case, your loan would go through underwriting with the address at TBD. That way the seller know that your loan is underwritten and will close in 10-15 days. Its the closest you can come to a All Cash offer.
Lender · Nationwide Lender · Member since 2015 · 1k+ posts · 814 votes
10y
@Account Closed If you looking to get a loan based on the purchase price, then you can do a Delayed Financing right away. Delayed Financing is available up to 6 months from purchase date.
If you are looking to do rehab and get get loan based on ARV, then you have to wait for 6 months.
An close alternative to hard money would be to get a Fully Approved Loan. This is not your typical pre-approval. In this case, your loan would go through underwriting with the address at TBD. That way the seller know that your loan is underwritten and will close in 10-15 days. Its the closest you can come to a All Cash offer.
Professional · Atlanta, GA · Member since 2015 · 85 posts · 15 votes
10y
@Upen Patel, the fully approved loan you mention, is this granted through a traditional bank? Is there a special name for the product or would he just say "I want to get approved for a loan (not pre-approved)"? Is this different from a line of credit from a bank?
Investor · Frankfort, IL · Member since 2015 · 206 posts · 55 votes
10y
@Account Closed
I was able to purchase using a hml, rehab, rent, and the refi in under two months. I used a conventional lender and was able to use the appraised value. The appraisal was about 15k lite imo but still worked fine.
95k purchase
17k rehab
150k appraisal
112k refi amount
Myself and my mortgage guy found exact comps that were less than a month old of 165k. The appraiser wouldn't budge off his original 150k with 6 month old comps. I was mad but the numbers still worked.
I had to provide an extensive spreadsheet, before, and after pics. So be ready if you try to refi conventionally under 6 months.
I'm getting ready to start another refi on Monday and that'll probably put me at about 10 total weeks of hard money on this one.
Investor · TX · Member since 2015 · 119 posts · 40 votes
10y
@Nick Versetto Would you say that if a property didnt need rehabbing that the turn around could be quicker ? Ie is the two months due to rehab time or time for the bank to process the refin ?
Investor · Canton-Akron, OH · Member since 2012 · 917 posts · 477 votes
10y
If you check with a local portfolio lender, they may be able to do it much quicker.
We have a couple local lenders that will refinance right away.
We close with cash, you could also use hard money, soft money (transactional funding) from a friend or acquaintance probably be cheaper. We start the loan process right away, within 30 days or less we are refinanced, and have our/transactional funding back.
Dont know if you can find such a lender in your area, but we do a couple of these deals a month here, we dont have any seasoning issues with our bank, only criteria; they will lend up to 80% of appraised value, or in case of rehab and flip, 80% of ARV.
Good luck in finding a good loan officer, they can make your investing life a lot easier.
Investor · Frankfort, IL · Member since 2015 · 206 posts · 55 votes
10y
Originally posted by @Account Closed:
@Nick Versetto Would you say that if a property didnt need rehabbing that the turn around could be quicker ? Ie is the two months due to rehab time or time for the bank to process the refin ?
For that you'd need to hold it for 6 months so that you could use an actual appraisal and not purchase price.
Lender · St. Louis, MO · Member since 2009 · 348 posts · 164 votes
10y
The way we look at it, if the funds are going to be provided for longer than a few hours that same day (for One Day Funding when doing a wholesale flip), then we as a hard money lender require that we get a Lender's policy and be named as the Lender on the HUD-1. If we are only lending for a few hours to get the A-B closed, then we DO NOT need to show on the HUD and the deal can be still be presented to the A Seller as a Cash offer. Ken, I too have seen countless deals blow up because they B Buyer thinks they can make a Cash offer and slip it under the nose of the A Seller. As long as the B Buyer understands the mechanics of how the transaction plays out between the title company and the A Seller, they can use the best strategy to get the deal to actual closing.
Thank you for your insights, I was under the impression that you could treat a a HML transaction as a cash transaction since there is no bank inspection and such.
How do buyers react to a HML buyer vs cash buyer vs financed seller ? In a context where the seller is not necessarily distressed.