BRRRR = BRRSRR Thoughts

[Alan Mills]

Hi BP,

I’d like to generate a fresh thread to address an issue that is catching many new investors by surprise: The 6-month Seasoning period.

I'm now on my 3rd Rental. It was time to give the BRRRR strategy a try. I purchased my first multi-family property property - a duplex - with cash. Rehab is under way (also cash) and it is looking great at 45 days. Time to get cash-out refinancing lined up, now at about 45 days out from completion - and hopefully tenant occupancy.

Enter the 6-month Seasoning requirement. For a new investor, this "S" really came as a surprise on my first BRRRR deal. It was just a bit of a left hook for me to learn about how Fannie & Freddie require 6 months on title before funding a cash out refinance, particularly on an investment property. I have since put in a fair amount of hours trying to track down options, such as local and national portfolio lenders (which always seem to be at a higher APR), I've learned a bit about delayed financing, and I've had a few conversations with hard money lenders, which doesn't seem to be the best way to go this time being that I did already have the cash upfront to make this project possible.

I’m hoping that we can generate some new perspectives on this issue in today’s market, particularly with the onset Coronavirus issue now entering into market conditions. (Maybe this is a non-issue?) Or perhaps there is a podcast (or other BP posts) that I missed that goes into more details on this issue. I enjoyed reading @Brandon Turner’s book, but it strikes me that this issue is reasonably important and doesn’t receive as much attention as it could use.

For a relatively green investor without a large amount of capital on hand, BRRRR-ing 2 properties per year seems like a slow way to get out of the starting gate, albeit perhaps one of the safest ways to get going.

In my specific situation, I can certainly carry the property for the full 6-months on title that is required by most lenders to get the best cash out refinancing options available. But is that really the best way to proceed in my current situation? What other advice would you suggest when it's time to move onto my next BRRRR deal? I really enjoy rolling up my sleeves and doing the work, but I could use some advice making some important decisions now and in the future.

Thanks BP world. BP Rocks!

Alan, investing in Colorado

[Kenneth Garrett]

@Alan Mills

You could refinance using commercial lending.  There is no seasoning required.  The interest rate is higher and you have to own it an entity.   The interest rate might be 1% higher, but you can refinance whenever your ready.  If your trying to get your money out ASAP this is one method.  You can still rent it right away.  Take the cashflow and bank it till your ready on the refinance or put it in your pocket.