How soon can I c/o refi a home that I'm rehabbing

[Marcus Cannady]

In lieu of drumming up cash elsewhere I'm looking at cash out refinancing a home I'm currently rehabbing. I'm not overly concerned with max ARV at this point. Numbers: 113k purchase, ~40k rehab, 300k ARV.

I have ~20-30k on hand to do the rehab, but I will run out of cash before the deal is fully rehabbed. As such, I'm curious to know the bare min that I need to do to get me to a rehab to help me finish the rehab. 

I'll do a HELOC when the house is fully rehabbed, at which time I should be able to have an appraisal done that fully respects the projected ARV.

I hope this makes sense, thanks for any insights shared!

[Mary K.]

@Marcus Cannady It's going to be hard refinancing on a mid-rehab property. I personally have never heard of that being done.

How much will you need to complete it? What about an unsecured line of credit through a bank? Suntrust offered me a LightStream loan at 6%, and minimal fees to open. Definitely cheaper than hard money. 

Another route is private money. I would actually post those details here and see if you get any takers.

[Stephen J Davis]

That is a hell of a deal (you rock) but you should not be using your own money to do it as a rule. A hard money lender would have given you the money to purchase it, rehab it and all of the closing costs. This would have been a zero down deal and you would have had the $40,000 to complete the rehab without using any of your money. In your case now I would look for private money from an investor to close out the deal. You can find them at local real estate investor groups. Good luck!

[Joe Villeneuve]

Actually, the answer is yes....with an asterisk.

*  The property must be habitable...and, you most likely will not get the max (you knew that), and probably a lot less than you bargained for.

Other options:

1 - Short term partner or short term bridge loan.  You can probably find another investor to do this.

2 - Establish contractors credit at all of your suppliers, with 30-60 day no interest (suppliers like giving incentives at the start).  Put your labor on 30 day payments and payment based on inspection and approval by city/lender/you.  Spend as little of your cash as you can.

[Account Closed]

Typically 3 months to use the full ARV.

[David Dachtera]

Originally posted by @Marcus Cannady:

In lieu of drumming up cash elsewhere I'm looking at cash out refinancing a home I'm currently rehabbing. I'm not overly concerned with max ARV at this point. Numbers: 113k purchase, ~40k rehab, 300k ARV.

I have ~20-30k on hand to do the rehab, but I will run out of cash before the deal is fully rehabbed. As such, I'm curious to know the bare min that I need to do to get me to a rehab to help me finish the rehab. 

I'll do a HELOC when the house is fully rehabbed, at which time I should be able to have an appraisal done that fully respects the projected ARV.

I hope this makes sense, thanks for any insights shared!

Looks like you got into a deal knowing you cannot execute your exit strategy. How did you acquire it? (Cash, loan, ???) What are your holding costs? What will your closing costs be when/if you sell?

It's a bit late in the game, but see if you can find (a) money partner(s) to help you finish the job.

My $0.02 ...

[Dave DeMarinis]

Did you buy it cash? If so, I think the combo of credit card with 0% for materials and introductory terms with as many suppliers is best advice. If you are still going to need money, then you should be able to easily place this loan (if there is no lien on the property) with an investor. Once you complete it, there are sources with 30 day seasoning from time of purchase so you'll be in good shape there.

[Marcus Cannady]

Thanks for your insights BiggerPockets, fam. In light of the follow up questions/ comments I will share a bit more context.

I've had this house for 2 years. I have been operating it as a rental in the intervening years. The long term plan has always been to BRRR it, however I just wanted to allow a bit of time to pass for comps to surge in the area. Anyone familiar with the (intown) westside of ATL will agree with me that now is that time. The loan is currently a conventional loan. Purchased it as a 'primary' residence.

@David Dachtera I have a strategy, however I was looking at this as one relatively painless option. One of a few.

Ultimately, I think @Joe Villeneuve you hit the nail on the head. I'll likely partner with an investor to get this done. Also, 'habitable' is indeed the operative term after talking to a few lenders and appraisers today. Bottom line the project has to be pretty far down the line in order to get done via the conventional route. 

Apparently it can be done, but it's so far down the line that for my purposes it's not ideal. I don't want to tap my on hand cash resources to that point.

Thanks again all!

[Dave DeMarinis]

@Marcus Cannady In that case, I would do a cost comparison of bringing in a partner compared to a Hard Money Lender. Interest rates are "high" for Hard Money but giving up equity is generally more expensive. Also, since this is a BRRRR, there isn't an easy way to pay off the partner which means you now are sharing ownership longterm. You can look at two hard money options.

1. You refinance the current loan plus renovation costs to a hard money lender. (I know, it sounds crazy but just figure out your total cost)

2. You get a hard money lender to give you a renovation loan, 2nd position. If you can do this, it will probably be cheaper but the larger the 2nd loan is compared to the 1st and it might even be cheaper to go with #1 above. The other reason to check on #1 is it may be hard to find someone to do #2. 

3. Compare this to the cost of giving up equity to a partner.

You can then choose the best one for your long term goals.

[Stephanie P.]

@Marcus Cannady

A hard money lender should be on speed dial for this one. Work up your budget for project completion, get your settlement sheet that shows how much you paid for the property and then show them the comps you have for fully renovated properties (assuming yours is fully renovated when complete) in your IMMEDIATE area and you should be able to get the money you need. Once the property is stabilized and the seasoning period is satisfied, you should be able to get a conventional loan. If you want to go faster or if you don't qualify for a conventional loan, once the property is stabilized you can get a portfolio loan based off the ARV with little or even no seasoning.

Best of luck.

Stephanie

[Nghi Le]

The short answer is immediately, if you're looking to put another conventional loan on it.  You've already owned it for 2 years.  The minimum seasoning period to use as-is value is 6 months.

Why not just do a cash-out refi now in order to pull out some money so you can finish your rehab? Even though it hasn't reached its full ARV potential, I'm guessing it's still worth more than when you purchased it, maybe somewhere between $150k to $200k?

Unless the property is in worse condition now than it was when you bought it, to the point that it's not financiable with a traditional loan?

I wouldn't necessarily recommend the credit card route.  You may mess up your utilization and hurt your credit scores, thus screwing yourself up for the eventual refi.  Whether you refi with a traditional or non-QM loan, all long-term loans are going to be based on credit score.

[Marcus Cannady]

Hello all! 

Just to update a bit, I ended up going HML route. Gonna get my money back out the deal - per many of your thoughts @Stephanie P. @Dave DeMarinis @Stephen J Davis - and let the Hard Money do the lifting. 

In retrospect, I probably should have done this from jump. I would have done a conventional c/o refi but the home had some serious leaks and other issues that i suspect would have been problematic for the conventional refi. I should have tried.

Nevertheless, the project should still be a success. I'll share pics in the appropriate section of the forums. Thanks again all!

[Oliver Carey]

No Seasoning Hard Money/Private Money can provide up to 80/85% LTV on Refinances with populations over 100k at rates starting at 4% with a decent FICO and can close in 2 weeks low doc and no do options