Cash-Out Refi vs. Delayed Financing: What is the difference

[Matthew Metros]

I am writing out my financing strategy as posted below. I am trying to understand the fundamental difference between Cash-Out Refi and Delayed Financing in Multifamily. I cannot seem to wrap my head around this!

Below I wrote my financing strategy - Passing along in case there is something off/ unclear.

We will be utilizing the BRRRR strategy of Buy Rehab Rent Refinance Repeat to grow the portfolio.

There are loan products that fall under the category of “Delayed Financing”. These products allow the borrower to first close on the property with cash, renovate the property to add value, and refinance once the property increased in value.

Once the property is renovated/stabilized and is "appraisal ready", the refinancing lender will be using an appraisal to determine the After Repair Value and will lend up to 70% of the after repair value (ARV).

In layman’s terms for our strategy to work, we are looking to buy at a lower loan amount and then refinance within a 2 year period into a lower interest and higher amount loan product.

We are looking for a delayed financing loan product that fits this strategy and mainly trying to avoid products that have high fees, a long seasoning period, and prepayment penalties.

This strategy allows you to deploy capital and get back the exact same amount (or more) within a 2-year timeline.