BRRRR in Boston? Refinance questions

[Chris Roche]

I have a found a decent deal in Boston, that I want to attempt to BRRRR. But, I am having real trouble with the finance/refinance process. I have the 20% down and most likely the money for the rehab.

I have been told that I can not buy the property in hard money, fix it, rent it and then refi into a conventional. This is because an LLC has to buy in hard money and conventional has to be done in a personal name.

I have been told that if I buy conventional, fix it and rent it, I can't cash out refi for 12 months.  If I do less than 12 months, then they will take the purchase price, not the appraised value. 

Can anyone provide any insight into the BRRRR process in Boston? How are you guys financing and refinancing?

Thank you.

[Ann Bellamy]

Chris, let me also jump in with further clarification. If you purchase with hard money in an LLC, your refinance will also be in an LLC and will require a conventional commercial loan. (For example, Cambridge Savings) Commercial loans are a little more expensive than conventional residential, and the rates can adjust every 5-10 years. INsurance and appraisals are also more expensive.

If you buy with a residential loan, and refinance in 12 months, (this is called seasoning) your refinance will be conventional residential.  Both of these loans will be cheaper than hard money and conventional commercial.  That's why I suggested going residential when you called, instead of using hard money.

So run the numbers in both scenarios, after you get the costs for both.  Don't forget to take increased insurance and appraisal into the mix.  I still think you will be better off with residential to start, and then residential in 12 months.  So what if it takes 12 months to refinance?  You'll be in an election year and should still get good rates in a year while enjoying residential rates for that entire 1st year.