Refinancing out of Private Money loan

[Kevin Kachin]

We are in Illinois - looking to purchase & rehab distressed single-family homes using private money loans. Once rehab is complete we plan to refinance to pay off the private money loan and lease-option the properties. (NOTE: we know going in where we need to be cost-wise in order to 100% refi out the private money).

Here is the issue - we sat with a mortgage "professional" the other day who repeatedly told us that we will only be able to refinance out 80% of what we put into the property. For example, if we spent $50,000 on purchase and rehab (making the property worth $100,000 after-repair-value) then we will only be able to refinance out $40,000 because we haven't owned the property for a year. I was under the impression that we could refinance out 65%-70% of the after-repaired value.

Any insights are most appreciated.

Thanks.

[Will Barnard]

Without a one year seasoning period, you are limited on cash out refi's, that is why you are running into this problem and will continue to.