Hey everyone! I am interested in implementing the BRRR method in Baltimore, MD and am wondering if there is a way that I can refinance sooner than 6 months seasoning? Also, does this seasoning period start when I close on the property or after a tenant has been place. If anyone knows of a lender in Baltimore that does not require seasoning at all or perhaps 3 months instead of 6 let me know! Thanks all!
@Jeffrey Castellano If you paid cash, the federal government (any conventional lender) can permit delayed financing...it's just like putting a mortgage in place after buying the property...avoids the re-finance fees and such. You can do this the day after you close.
If you didn't purchase for cash you may need to get creative to find lending...if you stay the seasoning course with a conventional lender, just be aware they won't lend to an LLC...or typically refi unless the property is in your personal name for 6-months...
But there are lots of varieties of lenders and lending...just a couple things to be aware of...
@Brandon Sturgill . I would be buying a property in cash up front then rehabbing the project to get a higher appraisal value and then would like to refinance asap. Most lenders from my understanding require a 6 month seasoning period. I wanted to know if there are any lenders, particularly in Baltimore, MD that either have no seasoning period or have a shorter seasoning period rather than 6 months which i find to be standard?
@Jeffrey Castellano , when you step outside of local banks and credit unions, seasoning requirements change dramatically. I work with multiple lenders that will refinance on value as soon as 30 days, and more at 90 days. It all depends on how important it is for you to recycle your cash quickly.
@Greg Downey Thanks for your info! Question- Do these lenders allow you to refinance on the appraised value of the property or the purchase price of the property. My whole model is to buy distressed, rehab, then have the property appraised for more than I paid and then refinance as fast as possible? Or do they only allow you to refinance of the price you paid? Also- do any of these lenders you use operate in the Baltimore, MD market? Thanks again for your educational post!
Yes, Yes and Yes. I would generalize to say that banks are not designed to embrace the BRRRR strategy. Again that I why stepping outside of that box can be a pretty big deal.
@Greg Downey How would you categorize the lenders you mention in your first comment? Are they hard money lenders, or other?
@Amanda Felton , no not hard money at all. This is how I would categorize lenders with some basic limiting underwriting factors:
Banks/credit units - long seasoning, GLOBAL DTI, rigid documentation, good/long-term rates
Tier 1 private money (institutional private money) - Short seasoning, property DTI, rigid doc, good/long-term rates (not as low as banks)
Tier 2 private money (institutional private money) - Short seasoning, NO DTI, asset based, moderate doc, higher long term rates
Tier 3 private money (institutional private money - bridge term lending, typically interest only type loans for 12-24 months.
Hope that gives some insight. From my perspective, banks serve the purpose of lending on very stable properties, where velocity of money is not a factor at all. For tier 1 private money, you are getting something very similar to banks, but don't look at personal DTI and understand that velocity of money is VERY important to making money.