Avoid Seasoning in BRRR Strategy?
Working on a BRRR right now - paying cash for property and rehab, then plan to refi into a 30 yr fixed at 6 months (required seasoning period to do refinance based on new appraisal instead of purchase price). Had an idea the other day about how to shorten the seasoning period, and wanted to see if anyone else has tried to do this...
some back story:
I use a private lender (family member) for cash, and our agreement on interest/repayment is not documented on the HUD - it's an informal agreement just between us. On my HUD, it shows up as cash purchase - no record of financing.
What if we had an attorney draw up a mortgage, or a construction loan note of some type, which would go on the closing statements as formal financing. Loan would be for 100% of the purchase price plus rehab costs. Once rehabbed/rented, I would do a rate/term refi instead of a cash-out refi. At closing, cash would be returned directly to my lender as a payoff instead of showing as cash out to me personally.
Anyone know if this will fly? or tried something similar? I believe the 6 month seasoning is a specific requirement for cash-out...wondering if I can structure this so it's not actually a cash-out. That way I can pay my lender back sooner, and move on to the next property.