Can I refinance before the property is rented?

5 Replies

I took out a personal loan to buy my first rental and now that I am almost finished with the repairs, is there any way to refinance the loan or get a new loan with better terms? (The building had about 30k at time of purchase)

The benefit to renting out before refinancing is that when the appraiser comes through you are able to prove that the property not only has more amenities but also is renting at a higher rate. Therefore your appraise will come in higher and you'll have more added equity.

@Chester Stoney

Hi Chester,

I believe this is all based on your lender. You may be able to refinance before finding a tenant but it will most likely be a much lower amount than the maximum LTV offered by your lender and the rate may be higher than if you had a tenant in place. This is all based on my experience with lenders so it may be different for you.

Just out of curiosity, since the renovations on the home are almost complete why do you want to refinance before placing a tenant?

@Chester Stoney - It depends on the lender. Some will do a perm rental loan on a vacant property and some won't. The lender will order a 1007 market rental analysis with the appraisal to gauge the average market rental rate for the area. Then they will calculate dscr from that in order to underwrite the loan. Sometimes LTV can be restricted or the interest rate will be higher. You have more/better lending options if you get a signed long term lease first. But there are options either way.

Originally posted by @Chester Stoney :

I took out a personal loan to buy my first rental and now that I am almost finished with the repairs, is there any way to refinance the loan or get a new loan with better terms? (The building had about 30k at time of purchase)

Potentially you can. A big question is your DTI and how you are qualifying for the loan. If your W2 income won't get in in then how they count rental income will be a big deal. If in order to get a loan you really need the rental income to count towards DTI , some lenders want a rental history before they use rental income, other can use it from day one of there being a tenant, and then others may be able to use potential rental income if the property is vacant. So it depends.