Texas seasoning period and Rental history for Refinancing

[Adam Young]

I'm currently setting up my LLC for my current rental property that is free and clear for 185,000. I'm looking to refinance and pull money out of my current rental.

1. I was informed prior to refinancing this property I have to show 1 year of rental history with a tenant. Is there any loop holes or additionally helpful information that can be provided. 

2. After I purchase another property and the opportunity presents itself, Is there any loop holes if I need to purchase another property before the seasoning period is up?

[Andrew Postell]

@Adam Young thanks for posting.  A lot to cover so I'll try to make it as brief as possible.

Seasoning - there actually is no seasoning with Fannie Mae or Freddie Mac. You can 100% refinance with no waiting.  Usually the issue is that either the deal wasn't structured correctly or that the lender has what the industry calls an "overlay".  Overlays are rules that lenders put OVER the Fannie/Freddie guideline.  Lenders are allowed to be more conservative on the rules if they want to....but not more flexible.

Lenders - you might have heard people say to work with smaller, local lenders.  This is because they usually have less overlays.  But how do you know for sure?  I've made a list of questions to ask potential lenders to help you see if they are investor friendly.  Here's the list:

Questions for Lenders

1. When do you start using rental income to help me qualify? (the answer needs to be immediately)
2. When do you start using “After Repair Value” on my property?
3. How long do you need me to be on title to refinance? (this is important if you do need a short term loan to purchase then refinance out - and the answer should be 1 day...very important that it is 1 day on title is all that is needed to refinance)
4. What is my minimum down payment required? (if they only require 15% down on a single family home that is usually a good sign that you are working with a flexible lender)
5. How many loans can I have with you?
6. Can I change title to my LLC?
7. Do you sell your mortgages?
8. What is your loan minimum?
9. Can you explain to me what your reserve requirements are?

Now, I will always suggest to speak with other local investors about who they use.  That usually helps get in front of the right lenders quicker.  Bigger Pockets has great state forums and the Texas forum is the most active forum of them all.  Also, we have many local Real Estate Investor groups that meat regularly (well, when there's no pandemic).  Those are also great resources to visit.

Let me know if you have any other questions.  Thanks!