Buying a single family with cash and financing out.

[Joshua Zdunich]

Is there an allotted time that must pass after a cash purchase of property to finance out into a traditional loan?   My lender is saying 6 months and I don't feel this is accurate.  I dislike having that much capital tied up for 6 months on a 1 month B.R.R.R.R., especially with rates being so low right now.   Thanks everyone for their time in reading and hopefully responding to this question.  

[Andrew Postell]

@Joshua Zdunich sometimes these concepts are difficult to explain in a forum setting.  I wrote a pretty lengthy article on this subject (and how to avoid it) that you can find HERE.  Now the first 2 sections will explain the restrictions that you will face...hopefully those will help some with the understanding of it.  But I'll also try to sum it up here in 2 scenarios

Scenario #1 - SFH ARV = $200k, Purchased for $180k (which is a pretty good deal) in cash. No rehab. In this scenario you would calculate the 2 choices you have:

1. Purchase Price = $180k
2. 75% ARV = $150k

So the LOWER of the 2 options would be $150k.  That's how the delayed financing exception works in that scenario.  Let's examine a different scenario...

Scenario #2 - SFH ARV = $200k, Purchased for $100k, Rehab of $80k. So the same out of pocket expenses to you....but here the loan is VERY different:

1. Purchase Price = $100k
2. 75% ARV = $150k

So the LOWER in this scenario is $100k....that's what you would be limited to in the first 6 months in this scenario.  And that's a big difference.  The lower of the two options is what the delayed financing exception allows.  Hope this makes a bit more sense.