How soon can I refi when BRRRR with cash

Question

Hello all, this is my first post since I joint this awesome forum.

After hearing a good number of podcast and reading in the forum. I finally made up my mind to try my first investment with BRRR strategy.

My Q is: had I put all cash in without using any lender upfront, would I be able to contact mortgage company for cashout refi sooner than 6 months. Any pros and cons?

In podcast I heard from one episode that the lady from Colorado she borrowed money from hard money lender with 3 months term(?) and successfully got commercial mortgage within the time period. On the other hand, I saw people sharing their experience that they’ll need 6 months cooling period ( is it what called) to get a mortgage.

Thanks all for any experience sharing is apprenticed for people like me a newbie..

David P. · Answer

@Jessica Zhang

Hi Jessica, you can refinance IMMEDIATELY on a residential purchase made with all cash where the funds are either through cash or HELOC.  Delayed financing is what you be used and I am working with @Jerry Padilla from Prime Lending.  They are nationwide and Jerry is awesome.

Of course with delayed financing, you are limited to the purchase price plus closing costs up to 70% of the After repair value of the home.  Whichever number is lower, so if your appraisal comes back super low for some reason(under purchase price) then you would get that instead.  So, any repairs you make after the purchase will not count in the refinance you get back. Most conventional lenders can do it, but either don’t know that they can or just will not do it. I had this experience with speaking to 3 different Senior loan officers working for the exact same lender, and two of the told me NO, but one said yes. I had them speak to each other and guess what?? The one that told me NO apologized and changed his answer to YES they can do it.  Some people also confuse delayed financing cash out with a normal cash out refinance.  There is 0 seasoning on delayed financing, but with a normal cash out some lenders make you wait a minimum of 6 months, maybe longer.  You can search through BP and find a solid lender, your local bank, or just contact @Jerry Padilla and he can help you out.

Hope this helps.

Jerry Padilla · Answer

@Jessica Zhang

@Anatole Doak

You can cash out refinance prior to 6 months with delayed financing if you paid cash for the property.

If you used a hard money lender you could do a rate and term refinance without any seasoning period as well.

There are some limitations with delayed financing.

• The new loan amount can not be more than the actual documented amount of the borrower’s initial investment in purchasing the property, plus the financing of closing costs, prepaid fees, and points (subject to the maximum LTV as well).

Anatole Doak · Answer

Hi Jessica,

The conventional lenders I've spoken with said it's at least 6 months before you can cash out refi on a traditional loan, even if it's your own money.   However, I'm sure there are exceptions to the rule and my suggestion would be to call lots of lenders to see what they can offer.  Something else to consider if you want to scale your business quickly would be a HELOC (home equity line of credit) on that first property.  I haven't researched much into the terms of those, but potentially you wouldn't have a waiting period if you paid cash for your first place?  Good luck!

Will Gaston · Answer

@Jessica Zhang It depends on who you're wanting to do the loan with.

I only borrow via commercial lending and I have had many banks that don't require any seasoning and have done a BRRR start to finish in less than 3 months before.

There are plenty of commercial lenders (usually small/local banks or credit unions) that are willing to do it without a seasoning period. You'll just need to call around your area and ask if that's the route you're wanting to go.

Bob Floss II · Answer

@Taylor Chiu That's probably the difference. I'm used to commercial loans where you can pull money out as soon as the property is cash flowing.

Justin Kane · Answer

depends, many lenders have different localized programs with different seasoning periods based on strength of loan applicant. If you are credible then you could BRRR as soon as 30 days and if your  deal is strong enough you could cash out as high as 80% depends on what programs your using through your lender

Victor S. · Answer

can you instead tap into a heloc at 75-80% and wait 6 months to refi? some helocs are free to get (annual maint fee applies)

Ryan Harsche · Answer

@Jessica Zhang so if you bought it cash and don’t want to use an updated or improved value, you can probably refinance immediately.  If you are going to do work to the home and want to refinance with the ARV, you will most likely need to wait a minimum of 3 months for commercial and 6 months for conventional.

Jerry Padilla · Answer

@David P.

Thank you for the mention!

David P. · Answer

@Jessica Zhang

You do take a mortgage, and depending on the circumstance (tenant in property), they will basically do a full doc loan but you dont have to supply a down payment for the loan.  Just make sure you can prove the source of the funds from a bank statement or HELOC statement. There are a few limitations to delayed financing, but the biggest positive is that you can get a better return on your cash since you took the biggest chunk back out to reinvent in another property.  Also, make sure your appraisal is where it needs to be or you will be kind of stuck.

Read about it here... https://www.biggerpockets.com/blogs/5110/42824-all...

Hope this works out great for you, and happy investing!!

How soon can I refi when BRRRR with cash

Most Popular Reply