Alternatives to waiting for the hold period after BRRRR?

22 Replies

I just purchased an all cash deal that I'm rehabbing and will have an ARV that I'll be able to finance and get back my initial investment (LTV 75%). I purchased the property and fixed it up all in cash, but in order to finance it to get my investment back, I believe I'll need to wait the minimum settle time which is ~6 months. I was able to purchase and rehab within a few weeks time, and I'd like to take advantage of that and move on to the next property. Is there anything I can do here to get financed sooner than the typical 6 month settle period? I realize I can just wait it out and cashflow nicely, but I'd like to get the ball rolling on additional properties here at the beginning (happy to hear arguments for/against that too, btw).

The solution I was thinking of was to do some sort of intermediate loan with private money until the 6 month period is over and then go with traditional lending at that time.  I'm sure there are other creative ways to do this, so figured I'd ask!

@Ross Yeager there are commercial lenders that have shorter seasoning periods. Or you could do delayed financing, but you'll be limited to the amount you can finance and will likely not be able to get all of your money out. Remember, when thinking about doing a short term loan and then a longer in the future, you'll have closing costs each time, so build that into your finances.

@Jason D. I purchased the property in all cash...It seems to me from searching around BP that with a cash purchase the seasoning period may not even be needed? 

You can look into delayed financing. There are limits to the amount you can finance, so it's not a cash out refinance, but it'll get you the majority of your investment back out

@Ross Yeager With a cash purchase, you can do a delayed cash-out refi without needing any seasoning. You will be limited to the lower of: Allowed LTV based on new appraisal OR purchase price + closing cost. None of the money you put into the rehab can come out.

If you are getting a significant bump in value and want to do a cash-out refi, then you need 6 month seasoning for conventional loan, or 3 month for a portfolio loan. With conventional the title is always in your name. With portfolio title can be in your name or an entity.

Keep in mind that seasoning doesn't mean that you have to wait that long to start the loan process. The loan process can start well in advance. You just can't close until the seasoning period has been meet.

Hope this help in clarifying your options.

I have a generic sounding s-corp I use as my PM co.  I record deeds of trusts in the amount of PP and rehab using it as the mortgagee.  I do this so there is no 'cash-out', just a rate and term refi.  The cash out is what necessitates seasoning from what I understand.  Remove that.

I haven't refinanced any of these, I mostly use them to appear encumbered if anybody pokes around. If I do decide to refi my latest BRR bought with cash, I will post a thread about my experience. Another reason I am waiting is so my pre-rehab purchase of the house 50 days ago doesn't end up being the appraiser's best comp.

As a side note, 6 months isn't forever.  Begin the process about 6 weeks prior. You will survive.

Originally posted by @Steve Vaughan :

I have a generic sounding s-corp I use as my PM co.  I record deeds of trusts in the amount of PP and rehab using it as the mortgagee.  I do this so there is no 'cash-out', just a rate and term refi.  The cash out is what necessitates seasoning from what I understand.  Remove that.

I haven't refinanced any of these, I mostly use them to appear encumbered if anybody pokes around. If I do decide to refi my latest BRR bought with cash, I will post a thread about my experience. Another reason I am waiting is so my pre-rehab purchase of the house 50 days ago doesn't end up being the appraiser's best comp.

As a side note, 6 months isn't forever.  Begin the process about 6 weeks prior. You will survive.

 good underwriter looking at your tax returns will see you own the debt and the asset.. probably gets bounced.. 

this is what HML did pre 08 all of our loans went to buy and hold folks and we did rate and term refi.. but we were a true third party lender .. its was a great gig while it lasted my average turn on my loans was 92 days.. and the buyers not only had no money in the deal they got refi proceeds usually 5 to 8k a house and they would do 4 and a time.. now they were suppose to take the refi proceeds and put them in their reserve account.. but alas the reserve account ended up having Jets skis in them instead maybe a new car.. or that trip they wanted to take.. etc etc.. anything but where it was suppose to go.. but I am with you if you can refi in 6 months just start the process and wait and see what you get.. bridge loan will defeat the purpose UNLESS you have a smokin deal and its worth spending 5 to 10k from a guy like me to bridge you .. IE you got a deal that has some great upside so the cost to get it is easily absorbed .. but generally not the case for most investors.. best to just wait and refi once.

Originally posted by @Jay Hinrichs :
Originally posted by @Steve Vaughan:

I have a generic sounding s-corp I use as my PM co.  I record deeds of trusts in the amount of PP and rehab using it as the mortgagee.  I do this so there is no 'cash-out', just a rate and term refi.  The cash out is what necessitates seasoning from what I understand.  Remove that.

I haven't refinanced any of these, I mostly use them to appear encumbered if anybody pokes around. If I do decide to refi my latest BRR bought with cash, I will post a thread about my experience. Another reason I am waiting is so my pre-rehab purchase of the house 50 days ago doesn't end up being the appraiser's best comp.

As a side note, 6 months isn't forever.  Begin the process about 6 weeks prior. You will survive.

 good underwriter looking at your tax returns will see you own the debt and the asset.. probably gets bounced.. 

this is what HML did pre 08 all of our loans went to buy and hold folks and we did rate and term refi.. but we were a true third party lender .. its was a great gig while it lasted my average turn on my loans was 92 days.. and the buyers not only had no money in the deal they got refi proceeds usually 5 to 8k a house and they would do 4 and a time.. now they were suppose to take the refi proceeds and put them in their reserve account.. but alas the reserve account ended up having Jets skis in them instead maybe a new car.. or that trip they wanted to take.. etc etc.. anything but where it was suppose to go.. but I am with you if you can refi in 6 months just start the process and wait and see what you get.. bridge loan will defeat the purpose UNLESS you have a smokin deal and its worth spending 5 to 10k from a guy like me to bridge you .. IE you got a deal that has some great upside so the cost to get it is easily absorbed .. but generally not the case for most investors.. best to just wait and refi once.

 My best guess is you're right (of course!). I bet my shady self-encumbrance gets bounced, but that's ok.  I may have to re-convey to get it done or just not bother.  I will post about my experience when I decide to do one.  Taking bets now. Odds are 3:1 against. Who's in?

Originally posted by @Steve Vaughan :
Originally posted by @Jay Hinrichs:
Originally posted by @Steve Vaughan:

I have a generic sounding s-corp I use as my PM co.  I record deeds of trusts in the amount of PP and rehab using it as the mortgagee.  I do this so there is no 'cash-out', just a rate and term refi.  The cash out is what necessitates seasoning from what I understand.  Remove that.

I haven't refinanced any of these, I mostly use them to appear encumbered if anybody pokes around. If I do decide to refi my latest BRR bought with cash, I will post a thread about my experience. Another reason I am waiting is so my pre-rehab purchase of the house 50 days ago doesn't end up being the appraiser's best comp.

As a side note, 6 months isn't forever.  Begin the process about 6 weeks prior. You will survive.

 good underwriter looking at your tax returns will see you own the debt and the asset.. probably gets bounced.. 

this is what HML did pre 08 all of our loans went to buy and hold folks and we did rate and term refi.. but we were a true third party lender .. its was a great gig while it lasted my average turn on my loans was 92 days.. and the buyers not only had no money in the deal they got refi proceeds usually 5 to 8k a house and they would do 4 and a time.. now they were suppose to take the refi proceeds and put them in their reserve account.. but alas the reserve account ended up having Jets skis in them instead maybe a new car.. or that trip they wanted to take.. etc etc.. anything but where it was suppose to go.. but I am with you if you can refi in 6 months just start the process and wait and see what you get.. bridge loan will defeat the purpose UNLESS you have a smokin deal and its worth spending 5 to 10k from a guy like me to bridge you .. IE you got a deal that has some great upside so the cost to get it is easily absorbed .. but generally not the case for most investors.. best to just wait and refi once.

 My best guess is you're right (of course!). I bet my shady self-encumbrance gets bounced, but that's ok.  I may have to re-convey to get it done or just not bother.  I will post about my experience when I decide to do one.  Taking bets now. Odds are 3:1 against. Who's in?

Ya know what I have my mortgage bankers CE this Monday… and well I am the token hard money mortgage banker in the group the other 75 all do conventional fannie Freddie stuff.  I will ask this as a case study and see what they say.. I mean 74 mortgage brokers should know and the person who runs the CE class is highly experienced..   stanby for news

@Ross Yeager , Yes, look into delayed financing. Some of the issues with limits based on LTV and not allowing you to pull out money from the rehab will depend on your lender. Some lenders may not care or may have more generous guidelines. Search for local lenders in the area of the investment and get more info on their limits and guidelines.

Many local, community banks and credit unions don't care about seasoning.  You would get a non-Fannie Mae type loan in the form of a commercial or portfolio loan.  The interest rate would be a little higher and a shorter term, but it would be a good move to start a banking relationship with that community bank.  IMO going to a private lender for a few months will cost you thousands in closing costs and not worth it.

You could use 0% interest business credit. Let the credit hold it instead of your money.

Originally posted by @Caleb Heimsoth :
@Steve Vaughan

I’ll take that bet you don’t refinance

Smart man. Mr. Jay just messaged me. 75 mortgage people at his conference thought self-encumbering to avoid cash-out to in essense, avoid the 6 month seasoning requirement, would probably be viewed as mortgage fraud. Not just a no-no. Fraud.  

If we were getting technical, the bet was that I can't, not that I don't.  That one you will lose.  I don't think I'll bother to put a til death, I mean mortgage, on this house ever :) But we will see.  Just got a lead on another cash buy only.... 

Originally posted by @Steve Vaughan :
Originally posted by @Caleb Heimsoth:
@Steve Vaughan

I’ll take that bet you don’t refinance

Smart man. Mr. Jay just messaged me. 75 mortgage people at his conference thought self-encumbering to avoid cash-out to in essense, avoid the 6 month seasoning requirement, would probably be viewed as mortgage fraud. Not just a no-no. Fraud.  

If we were getting technical, the bet was that I can't, not that I don't.  That one you will lose.  I don't think I'll bother to put a til death, I mean mortgage, on this house ever :) But we will see.  Just got a lead on another cash buy only.... 

 Keep in mind these are all retail MLO's who do government full doc loans..  as stated above a commercial portfolio lender can play by their rules.. I have a line of credit with my bank for this specifically I buy for cash they refi me as soon as a new appraisal is in.. no waiting period.. of course these are short term value add loans not long term buy hold loans. but I suspect they would do the same if I wanted to own rentals.

What I have Steve and have had for 15 years.. is I have a TRUE unsecured LOC that I use to buy the sherrif or trustee sales for cash.. so NONE of my own money... then when I get the trustee's deed and a quick appraisal the bank moves them over to my holding and rehab line.. again no money out of pocket.. AND bank rates with interest only on drawn funds.. its pretty slick.. So virtually all my returns are infinite since I rarely have to put any cash into any deal.

Originally posted by @Ross Yeager :

I just purchased an all cash deal that I'm rehabbing and will have an ARV that I'll be able to finance and get back my initial investment (LTV 75%). I purchased the property and fixed it up all in cash, but in order to finance it to get my investment back, I believe I'll need to wait the minimum settle time which is ~6 months. I was able to purchase and rehab within a few weeks time, and I'd like to take advantage of that and move on to the next property. Is there anything I can do here to get financed sooner than the typical 6 month settle period? I realize I can just wait it out and cashflow nicely, but I'd like to get the ball rolling on additional properties here at the beginning (happy to hear arguments for/against that too, btw).

The solution I was thinking of was to do some sort of intermediate loan with private money until the 6 month period is over and then go with traditional lending at that time.  I'm sure there are other creative ways to do this, so figured I'd ask!

Ross, you should know that you have been given some really bad advice in this thread.

delayed finance will allow you to skip the seasoning period. Others have stated, this will not allow you pull out your rehab funds and this is just NOT CORRECT.

the rule for delayed finance is not 100% of your purchase price, it's 100% of HUD, and that's very different.

I put my rehab and insurance costs on the HUD and get them back every time. I have nothing invested in any of my deals. I get 100% funds back every time.

The last one I did with an 8.5 week turnaround, 100% funds taken out

the current one will take me just under 12 weeks, 100% funds taken out.


the fannie mae rule is

75% of ARV or 100% of HUD whichever is lower.

so when you buy a house with cash, the HUD is what you paid for the house. That's what it always defaults to, but you can add anything you want to the HUD just by asking.

unfortunately I don't have a picture of my last HUD n my work computer, but I can get you one if needed. I've written about this for the BP blog as well.

so when they give you the hud, you tell them "here, add 25K for rehab, and it's gonna go to this company" and you give them the invoice from the contractor. They will disperse the payments as you direct. You do the same for insurance.

@Jessica Trombley You will have to pay the full invoice amount up front, but you can escrow out the payments through a closing attorney. Easy to work this out. You cannot place a paid invoice on a HUD. The HUD acts like a reciept.

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