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Updated about 6 years ago on . Most recent reply

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Obed H. Bey
  • Philadelphia, PA
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If I finance a deal with 100% cash can I still do a BRRRR?

Obed H. Bey
  • Philadelphia, PA
Posted

If I purchase a small multi-family home 100% cash can I still refinance it OMG since I don't have a mortgage? How does that work? Is it recommended? Do you have any suggestions?

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Kevin Sobilo
  • Rental Property Investor
  • Hanover Twp, PA
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Kevin Sobilo
  • Rental Property Investor
  • Hanover Twp, PA
Replied

@Obed H. Bey, I have been doing exactly this.

Some lenders have a seasoning period of 6-12 months. If you refinance before that they may use the lesser of your purchase cost + rehab and the appraisal to establish the valuation.

So, for example lets assume buy for $20k and rehab for $20k ($40k all in) and the house appraises for $60k. If you refinance after only owning the house 3 months, you will likely only be able to get 75% LTV on $40k valuation or a $30k loan.

However if you wait til the seasoning period has passed for your lender 6 or 12 months from purchase, then you could refinance at 75% LTV of the $60k appraisal which is $45k. That is MORE than the $40k you have in the property.

Check with your lender to find out their requirements. So, that you can plan accordingly. Smaller community banks are where you want to look and speak with their commercial lending department. Most loans of this type are adjustable rate 15 or maybe 20 year loans with an initial rate lock period.

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