Can I refinance conventional if I pay cash for a rental property?

15 Replies

I have a deal under contract (VA foreclosure) and possess enough cash to purchase and rehab it. I live in Texas. I've heard that if I pay cash and don't use a hard money lender, I would have to hold it for one year before refinancing it conventionally.

Is this true?  The hard money costs I could save are significant considering I have enough cash to do it without.

I'm sure this has already been answered.  Please forgive me, this is my first investment property and first post on BP.


most lenders want a yr of rental history or more before refinancing and remember that they usually only refi 70-80% of appraised value plus a load of closing costs.  True private lenders are better bet but shorter term

I've been lead to believe that if I go hard money I can refinance to conventional within 3 months.  If I use my own cash, then I'd have to wait 1 year to refinance to conventional.  Is this true or am I stuck with a hard money loan for 1 year?

here's an article on the Fannie Mae delayed financing program:

You should also call around to local credit unions and portfolio lenders- they may be willing to work with you even if they don't do the particular program mentioned in this article.

If you are planning to keep the property hard money is probably not the way to go. It might make sense for a flip.

This post has been removed.

If you have enough cash to acquire and refurb it, why are you seeking a loan on it? Have other plans for the equity?

The plan is to acquire at least two leveraged SF properties and rent for two years.  I have an additional fund to possibly invest as a passive in an appartment deal.

So, of using cash ties up the equity then my plans can't work.  It would tie up nearlyall my investment money.  I could tie it up for 2-3 months to save a few thousand closing costs, but not if I can't rrefi for a whole year.

Talk to a local lender or credit union as suggested above. I found a local lender that would refinance a cash purchase after 6 months with a 70% LTV. If you do the deal right, you could be able to cash out enough to cover your initial outlay of cash leaving you the same buying ability for the next deal.

Good luck.

What about a HELOC if your unable to refi?

I understand the situation now.  Fannie Mae will refinance it but their limits are that they will fund 75% of the appraised value OR the amount currently owed, whichever is less.  If I pay cash, the amount I owe is zero so no refi loan.

If I owe hard money, then they can lend me that amount as long as it's not greater than 75% of the appraised value.


I did my first property cash & sellers note and was able to cash-out refinance 6 months after closing. Just purchased my second property for cash and my mortgage guys says 6month cash out is no problem as long as I have tenant leases signed. The caveat is that you probably won't get an 80% mortgage on appraised value (at least I didn't).

My local bank does 75% of appraised value cash refi after 6 months. That's what you should aim for. 

@Wayne Solum  When you do a cash purchase, you have the option to do a Delayed Financing within 60 days. This would a purchase loan on the purchase price/appraisal. If you want to get the loan on a new appraised value, then you will have to wait for 6 months (not 1 yr), to be able to do a refi with a new appraisal.

Upen Patel

Mortgage Banker, VA Loan Specialist

National Lender, Federal NMLS# 1374243

@Wayne Solum

There are a lot of opinions on this thread.... Because there are a lot of financing programs. The standard rule of thumb for a cash out refinance is six months if based on the new appraised value ... However I know a lender in the Houston area who will do a cash out refinance based on the new appraised value immediately… Referred to in above posts as a delayed financing program .... This is a huge benefit if you bought the property below value and can be all in at about 75% of ARV ... You can get all your money (including rehab costs) back out for the next project If you would like more information PM me and I will forward contact info to you for the lender

Send me the lender please,

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