Rinse and repeat logistics

9 Replies

I have heard a lot about this "rinse and repeat" strategy and I am wondering about the logistics. I recently bought a house where I used a home equity line of credit for the 25% down payment and a conventional mortgage for the 75% remaining. After I close, I would like to refinance so that I can take out that 25% and use it toward my next property. Luckily I bought the property with $30,000 built in equity so I don't have to worry about the property not appraising for enough to take out that 25%.

My question is, how do I logistically refinance as far as timing goes? Can I close on the primary loan in one day, and then refinance that same day? Do I have to wait a certain amount of time before I can refinance? Can I use the appraisal from the primary mortgage for the refinance? Also, I'm really not looking forward to paying closing costs on the refinance since I just paid a boatload of closing costs for the primary mortgage… Is there a way around this?

Thank you in advance for any and all help!

Most lenders are going to want you to season the property 6-12 months before refinancing if you are getting cash back beyond the original mortgage amount. 

To expect that you will be able to refinance out all your cash on rentals is not a realistic expectation. Can it be done yes. Can you do it consistently time after time in a simple "rinse and repeat" process - not likely. 

Hi Sandra,

As Ned said, it's not going to be "easy" on all rental properties but it is possible. I would recommend calling around to local lenders to see if any of them do "delayed financing." This is where you can refinance immediately after purchasing the property. There are not a whole lot of lenders out there who do it but you can find them if you spend the time calling around.



@Ned Carey  and @Eric Black  Thanks so much for your insight.  I called my lender and because of Fannie Mae financing rules, she said that I do have to wait 6 months.  Darn!  I'll figure out another way...  

@Sandra Holt   I would start by calling other lenders, especially smaller, local banks. They have to follow federal guidelines but can be looser with other restrictions.

@Eric Black  Will do!  I'll definitely try other banks if this Fannie Mae regulation is not one that is a hard and fast rule that all lenders have to go by.  Thanks again!

@Sandra Holt   small community banks are more likely to be the ones with different rules. You are looking for a "Portfolio Lender"  This is one that does not sell their loans to the secondary market. Something like Revere Bank in Laurel, the banks with 1-5 branches. Avoid the national players like Chase or Bank of America.

@Sandra Holt   If you're looking for a Fannie Mae loan then the guidelines will be the same for all Fannie Mae lenders. The smaller local banks may hold the loan in-house which is how they can have looser restrictions. Best of luck!

Gotcha.  Thanks again for the help.  

Misconception, that all Fannie Mae originators/lenders have the same underwriting, they don't, they have the same initial guidelines to meet, they may also make additional requirements or have stricter underwriting for a product, that's because they are on the hook for the origination and they may not want the risk of a particular product.

Wholesale mortgage bankers can also make additional requirements for originators, that is the bunch that the bank or broker sells the mortgage to on a one at a time basis, the loans may be adjusted to local or regional markets, a loan may have different terms or requirements in Cali as opposed to Mo.

 Cash out refis are at 75% for owner occupied, no cash out for investor products so you'd be looking at a portfolio lender.

Loans that meet securitization guidelines can be sold into the secondary, they may exceed those requirements.

Call your lenders, before you devise your strategy you need to know what is available in your area. There really isn't an endless rinse and repeat as the more loans you have the guidelines get tougher. Good luck :) 

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