Refinance Struggles/Question on my first BRRRR

Memphis, Tennessee
BRRRR - Buy, Rehab, Rent, Refinance, Repeat
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Refinance Struggles/Question on my first BRRRR

Casey Adams
Member since 2023 · 23 posts · 14 votes

Hello!

Rehab ($25-$30k) on my first BRRRR is coming to a close (Purchased mid January) and I am now hunting down financing. I paid cash for the property and am looking for an 80% LTV cash out refinance. I got a quote stating that they could give me an LTV that would cover the purchase price of the house + closing costs ($86k), which is roughly 66% LTV.

The ARV of the townhome should be roughly $130k. So here's my question:

Is it normal to take a pre 90 day LTV to recoup the purchase cost, wait the seasoning period, and refinance the rest of the cash out at a later date?

Or is it better to wait out the seasoning period with your loan balance (I used a HELOC so no hard money lenders or balloon payments) and just refi out in 6 months?

Also if any lenders in the Memphis area have advice it would be appreciated! Thank you ahead of time for any advice!

The first lender I spoke to essentially said 12 months seasoning is all they offer, which would be really unfortunate for my time frame on getting into another property. Is that a standard thing or just simply what one lender might offer? The other two I reached out to did not return my calls as of yet.

Thank you!

Casey

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River SavaPro Member
Lender · USA · Member since 2022 · 1k+ posts · 1k+ votes
2y
Quote from @Clint Jusino:
Quote from @Jacob Sherman:

you can get no seasoning upto 80% as long as the rent covers the mortgage


Can you please share what lender can do this? I'm in a very similar boat and was told to do a DSCR loan you need to wait 3 months seasoning period.


Some lenders will allow under 3 months of seasoning however they will use the lower of cost basis and as-is appriased value when underwriting

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  • Jacob Sherman
    12 Penns Trail Suite 138 Newtown, PA 18940 · Member since 2023 · 1k+ posts · 319 votes
    2y

    you can get no seasoning upto 80% as long as the rent covers the mortgage

    1Reply
  • Clint Jusino
    Dallas · Member since 2020 · 154 posts · 95 votes
    2y
    Quote from @Jacob Sherman:

    you can get no seasoning upto 80% as long as the rent covers the mortgage


    Can you please share what lender can do this? I'm in a very similar boat and was told to do a DSCR loan you need to wait 3 months seasoning period.

    1Reply
  • Nate HerndonPro Member
    Lender · Springfield, MO · Member since 2023 · 277 posts · 195 votes
    2y

    @Casey Adams @Clint Jusino There's a few programs that I utilize routinely for my clients on the 90-day BRRRR refinance for 75-80% LTV. I know that searching for financing sooner than that is appealing, but the best rates that I have seen all require closing after 90 days of ownership.

    I will usually kick things off around day 60 of ownership and plan to close within four weeks of that. We can discuss further when you are ready for a deal review!

    [email protected]417-605-2196
    3Reply
  • Jacob Sherman
    12 Penns Trail Suite 138 Newtown, PA 18940 · Member since 2023 · 1k+ posts · 319 votes
    2y
    Quote from @Jacob Sherman:

    you can get no seasoning upto 80% as long as the rent covers the mortgage


     Yes absolutely ! I’m able to assist . Let’s connect and discuss . 

    0Reply
  • Robin SimonBusiness Member
    Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
    2y
    Quote from @Casey Adams:

    Hello!

    Rehab ($25-$30k) on my first BRRRR is coming to a close (Purchased mid January) and I am now hunting down financing. I paid cash for the property and am looking for an 80% LTV cash out refinance. I got a quote stating that they could give me an LTV that would cover the purchase price of the house + closing costs ($86k), which is roughly 66% LTV.

    The ARV of the townhome should be roughly $130k. So here's my question:

    Is it normal to take a pre 90 day LTV to recoup the purchase cost, wait the seasoning period, and refinance the rest of the cash out at a later date?

    Or is it better to wait out the seasoning period with your loan balance (I used a HELOC so no hard money lenders or balloon payments) and just refi out in 6 months?

    Also if any lenders in the Memphis area have advice it would be appreciated! Thank you ahead of time for any advice!

    The first lender I spoke to essentially said 12 months seasoning is all they offer, which would be really unfortunate for my time frame on getting into another property. Is that a standard thing or just simply what one lender might offer? The other two I reached out to did not return my calls as of yet.

    Thank you!

    Casey


     Check out this article published on BP last year on this exact topic - https://www.biggerpockets.com/blog/brrrr-loans-what-are-the-...

    A couple of more notes:

    -The 12 month seasoning thing is likely due to the new conventional (Qualifying Mortgages - Agency Fannie/Freddie Rules) that rolled out last April making this the standard rule for conventional loans. If the lender you talked to only has this option, you should shop around for lenders that have other loan products

    -80% cash-out refinance is going to be challenging in any circumstances, but especially with a short seasoning period.  Usually, you will max out around 75% or 70% or so with a super-short period.  There is somewhat of a "glitch" in the market were rate-term refinances at 80% are available, "punishing" those that buy in cash instead of hard money

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    0Reply
  • Jordan RayBusiness Member
    Real Estate Agent · Memphis, TN · Member since 2023 · 623 posts · 321 votes
    2y
    Quote from @Casey Adams:

    Hello!

    Rehab ($25-$30k) on my first BRRRR is coming to a close (Purchased mid January) and I am now hunting down financing. I paid cash for the property and am looking for an 80% LTV cash out refinance. I got a quote stating that they could give me an LTV that would cover the purchase price of the house + closing costs ($86k), which is roughly 66% LTV.

    The ARV of the townhome should be roughly $130k. So here's my question:

    Is it normal to take a pre 90 day LTV to recoup the purchase cost, wait the seasoning period, and refinance the rest of the cash out at a later date?

    Or is it better to wait out the seasoning period with your loan balance (I used a HELOC so no hard money lenders or balloon payments) and just refi out in 6 months?

    Also if any lenders in the Memphis area have advice it would be appreciated! Thank you ahead of time for any advice!

    The first lender I spoke to essentially said 12 months seasoning is all they offer, which would be really unfortunate for my time frame on getting into another property. Is that a standard thing or just simply what one lender might offer? The other two I reached out to did not return my calls as of yet.

    Thank you!

    Casey

    6 months seasoning is probably your best choice. Reach out to @Grant Schroeder, he has a great product!

    [email protected]662-642-1458
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    1Reply
  • John O'LearyPro Member
    Lender · Winter Park, FL · Member since 2021 · 737 posts · 412 votes
    2y

    Depending on location (state) there are options for 80% cash out with no seasoning as long of proof of rehab is provided. With DSCR loans the base rate works off of credit score and LTV, think of an x and y axis. The higher the LTV, the higher the rate. It needs to qualify on DSCR and I would make sure the 80% still hits your cash on cash goal.

    [email protected]800-663-4122
    1Reply
  • Mike Klarman
    Specialist · NJ · Member since 2022 · 1k+ posts · 649 votes
    2y

    There are 90 day seasoning lenders, there are even 0 month seasoning lenders as well but you pay for it in the rate.

    1Reply
  • Jacob Sherman
    12 Penns Trail Suite 138 Newtown, PA 18940 · Member since 2023 · 1k+ posts · 319 votes
    2y

    Hey ! There are actually options for upto 80% without seasoning as long as the rent covers the mortgage . Is it currently rented ? 

    1Reply
  • Jake BakerBusiness Member
    Flipper/Rehabber · San Diego, CA · Member since 2020 · 1k+ posts · 694 votes
    2y

    @Casey Adams

    Plenty of lenders that can cash you out in DSCR loan as long as the market rent fits the ratio.

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  • Casey Adams
    OP
    Member since 2023 · 23 posts · 14 votes
    2y

    Thank you everyone for the good info! The current DSCR is 1.023 so I might be able to go that route. It'll rent probably within 2-4 weeks.

    Thank you very much for all the responses! I'll try to keep you posted

    0Reply
  • Casey Adams
    OP
    Member since 2023 · 23 posts · 14 votes
    2y
    Quote from @Nate Herndon:

    @Casey Adams @Clint Jusino There's a few programs that I utilize routinely for my clients on the 90-day BRRRR refinance for 75-80% LTV. I know that searching for financing sooner than that is appealing, but the best rates that I have seen all require closing after 90 days of ownership.

    I will usually kick things off around day 60 of ownership and plan to close within four weeks of that. We can discuss further when you are ready for a deal review!


     Awesome info. I'm close to the 60 days so that's why I'm looking into options. I was hoping a local bank could help but they aren't very good at returning calls apparently to get free money from me haha. 

    I will continue to shop around or wait for a tenant then weigh as well DSCR.

    1Reply
  • River SavaPro Member
    Lender · USA · Member since 2022 · 1k+ posts · 1k+ votes
    2y
    Quote from @Clint Jusino:
    Quote from @Jacob Sherman:

    you can get no seasoning upto 80% as long as the rent covers the mortgage


    Can you please share what lender can do this? I'm in a very similar boat and was told to do a DSCR loan you need to wait 3 months seasoning period.


    Some lenders will allow under 3 months of seasoning however they will use the lower of cost basis and as-is appriased value when underwriting

    [email protected]
    3Reply
  • Grant SchroederPro Member
    Lender · OR ID AZ CA WA CO NV TN MT · Member since 2018 · 598 posts · 312 votes
    2y

    Thank you for the shoutout @Jordan Ray! @Casey Adams I would be glad to connect with you on this and talk through options. We have 6 investors doing BRRRR refinancing right now in and around Memphis. This is our bread and butter! I also have some good strategies our investors have been using with delayed financing to avoid any seasoning period and increase the velocity of their money by being able to refinance sooner and take down more properties.

    [email protected]541-231-1256
    2Reply
  • Jamie Parker
    Real Estate Investor · Memphis, TN · Member since 2016 · 402 posts · 129 votes
    2y
    Quote from @Casey Adams:

    Hello!

    Rehab ($25-$30k) on my first BRRRR is coming to a close (Purchased mid January) and I am now hunting down financing. I paid cash for the property and am looking for an 80% LTV cash out refinance. I got a quote stating that they could give me an LTV that would cover the purchase price of the house + closing costs ($86k), which is roughly 66% LTV.

    The ARV of the townhome should be roughly $130k. So here's my question:

    Is it normal to take a pre 90 day LTV to recoup the purchase cost, wait the seasoning period, and refinance the rest of the cash out at a later date?

    Or is it better to wait out the seasoning period with your loan balance (I used a HELOC so no hard money lenders or balloon payments) and just refi out in 6 months?

    Also if any lenders in the Memphis area have advice it would be appreciated! Thank you ahead of time for any advice!

    The first lender I spoke to essentially said 12 months seasoning is all they offer, which would be really unfortunate for my time frame on getting into another property. Is that a standard thing or just simply what one lender might offer? The other two I reached out to did not return my calls as of yet.

    Thank you!

    Casey

    There are some lenders that require no seasoning, Locally. They are here in memphis. If you want I can refer you. I am surprised that they have not reached out in this thread. Maybe they cannot see every post. PM me and I can point you towards a couple of options for Refi with minimal seasoning. 
    1Reply
  • Taz Zettergren
    Real Estate Agent · Memphis, TN · Member since 2019 · 365 posts · 264 votes
    2y

    @Casey Adams for a conventional loan they will require 6 months but some lenders can do dscr within 90 days. @alex bekeza is a good reference that might can assist

    1Reply
  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    2y
    Quote from @Casey Adams:

    Hello!

    Rehab ($25-$30k) on my first BRRRR is coming to a close (Purchased mid January) and I am now hunting down financing. I paid cash for the property and am looking for an 80% LTV cash out refinance. I got a quote stating that they could give me an LTV that would cover the purchase price of the house + closing costs ($86k), which is roughly 66% LTV.

    The ARV of the townhome should be roughly $130k. So here's my question:

    Is it normal to take a pre 90 day LTV to recoup the purchase cost, wait the seasoning period, and refinance the rest of the cash out at a later date?

    Or is it better to wait out the seasoning period with your loan balance (I used a HELOC so no hard money lenders or balloon payments) and just refi out in 6 months?

    Also if any lenders in the Memphis area have advice it would be appreciated! Thank you ahead of time for any advice!

    The first lender I spoke to essentially said 12 months seasoning is all they offer, which would be really unfortunate for my time frame on getting into another property. Is that a standard thing or just simply what one lender might offer? The other two I reached out to did not return my calls as of yet.

    Thank you!

    Casey


     Hey Casey, 

    There are a handful of DSCR lenders that do not have a seasoning requirement to use the new appraised value at 80% LTV. The rate will be high though.

    [email protected]818-269-7983
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    0Reply
  • Stuart UdisPro Member
    Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
    2y

    @Casey Adams This is going to be lender specific. By way of example, some lenders require seasoning, some dont. Some lenders require a DSCR of 1.25, others may require a 1.2 or 1.15 etc. Two lenders who both require a 1.25 DSCR may underwrite using different expenses ratios. One might use a 7% vacany rate whereas the other requires a 5%. One may require a property managent fee to be included in the expense ratio whereas another may not. These are just examples to ilustrate lenders will underwrite your property in various ways and understanding these nuances of their underwriting will help you determine the best financing option for your specific needs and objectives.

    [email protected]
    1Reply
  • Brittany MinocchiBusiness Member
    Lender · Massillon, OH · Member since 2022 · 1k+ posts · 486 votes
    2y

    @Casey Adams @Clint Jusino there are lenders that will go up to 80% LTV on a cash out depending on state, FICO, level of experience, etc and some have NO required seasoning if you have done rehab to justify the increase in value. Tennessee is one that allows 80% if you otherwise qualify. Rates for the shorter seasoning period products and/or higher LTV are usually a bit higher. Otherwise, 3-6 months seasoning is pretty standard. Conventional financing now requires 12 months (it used to be 6), and to refi before that you're looking at delayed financing, which is why your LTV is being based on purchase price instead of appraised value.

    Usually the lowest of the lease or market rents are used to qualify, doesn't necessarily have to be rented currently to get it done unless it's a multi-unit....but it does have to be rent-ready. 

    [email protected]330-354-6590
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  • Alex Hunt
    Lender · Member since 2022 · 441 posts · 134 votes
    2y
    Quote from @Casey Adams:

    Hello!

    Rehab ($25-$30k) on my first BRRRR is coming to a close (Purchased mid January) and I am now hunting down financing. I paid cash for the property and am looking for an 80% LTV cash out refinance. I got a quote stating that they could give me an LTV that would cover the purchase price of the house + closing costs ($86k), which is roughly 66% LTV.

    The ARV of the townhome should be roughly $130k. So here's my question:

    Is it normal to take a pre 90 day LTV to recoup the purchase cost, wait the seasoning period, and refinance the rest of the cash out at a later date?

    Or is it better to wait out the seasoning period with your loan balance (I used a HELOC so no hard money lenders or balloon payments) and just refi out in 6 months?

    Also if any lenders in the Memphis area have advice it would be appreciated! Thank you ahead of time for any advice!

    The first lender I spoke to essentially said 12 months seasoning is all they offer, which would be really unfortunate for my time frame on getting into another property. Is that a standard thing or just simply what one lender might offer? The other two I reached out to did not return my calls as of yet.

    Thank you!

    Casey

    Hey Casey, not sure if you are still looking for advise on this, but wanted to clear something up. Depending what lender you go to, some don't have seasoning when do about $20k  in renovation on a value of this size. So you can get the 75%LTV cashout refinance as soon as you are completed with the renovations and get a tenant in place.

    Hope this helped, happy to connect on this further!
    1Reply
  • Alex BekezaBusiness Member
    Lender · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
    2y

    @Taz Zettergren Thanks for the shout out! 

    [email protected]818-606-8823
    Investor Property Loan5306 Reviews
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