Cash out refi rental property with DSCR loan

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Cash out refi rental property with DSCR loan

Jephte Augustin
Lawrence Township, NJ · Member since 2017 · 22 posts · 9 votes

I have a question

I have property I just acquired and renovated with a Fannie Mae loan. I’m looking to cash out refi, but I have to wait 12 months of seasoning before I can do that.

Does that seasoning period apply if I cash out refi into a DSCR loan?

I can see a scenario where I take on the risk of a high interest rate and less flexible terms for 5 years, so I can access my cash sooner if that option is there.

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Robin SimonBusiness Member
Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
2y
Quote from @Jephte Augustin:

I have a question

I have property I just acquired and renovated with a Fannie Mae loan. I’m looking to cash out refi, but I have to wait 12 months of seasoning before I can do that.

Does that seasoning period apply if I cash out refi into a DSCR loan?

I can see a scenario where I take on the risk of a high interest rate and less flexible terms for 5 years, so I can access my cash sooner if that option is there.


Yes, as other people have mentioned - DSCR Lenders have prorprietary guidelines and generally offer more customized and shorter seasoning periods.

Also check out this article published last year on BP on this exact topic/question - hope it helps!

https://www.biggerpockets.com/blog/brrrr-loans-what-are-the-...



BRRRR Loans: What Are the Options, and How Do DSCR Loans Stack Up?

The BRRRR method of real estate investing continues to be one of the most-used strategies in 2023. With interest rates elevated yet property values remaining resilient, finding cash flow with a reasonable down payment is an incredible challenge.

However, the BRRRR strategy (buy, rehab, rent, refinance, repeat) makes sense for a lot of investors, as value can be created through forced appreciation (renovations) and capital recycled through cash-out refinances. With rates high and competition fierce, nailing the financing piece of the BRRRR method has never been more important.

This article will explore the loan options facing BRRRR strategy investors, with a focus on the all-important third R: refinance. Specifically, we'll compare DSCR refinance loans to traditional options, namely bank or conventional loans.

[email protected]
Harpoon Capital514 Reviews
WebsiteView Page
10Reply
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  • AJ ExnerPro Member
    Lender · Springfield, MO · Member since 2023 · 655 posts · 318 votes
    2y

    Hey Jephte,

    Most DSCR lenders are going to have significantly less seasoning requirements, usually around 6 months, and honestly, you might be surprised at how competitive the rates would be.

    I know of a program that can refinance at 90 days seasoning with rates in the 6s right now, just sent a DM and would love to see if we can help.

    Good luck!

    [email protected]417-427-2612
    0Reply
  • Miranda Holland
    Lender · Macon, GA · Member since 2015 · 191 posts · 59 votes
    2y
    Quote from @Jephte Augustin:

    I have a question

    I have property I just acquired and renovated with a Fannie Mae loan. I’m looking to cash out refi, but I have to wait 12 months of seasoning before I can do that.

    Does that seasoning period apply if I cash out refi into a DSCR loan?

    I can see a scenario where I take on the risk of a high interest rate and less flexible terms for 5 years, so I can access my cash sooner if that option is there.


     

    Hi Jephte,

    The seasoning period can vary depending on the lender. While most private lenders typically have seasoning requirements ranging from 6 months to a year for refinancing, even with a DSCR loan, there are some lenders who don't have any seasoning requirements at all.

    It’s definitely worth exploring your options if you’re looking to access your cash sooner. Feel free to reach out if you have any other questions or need more information!

    0Reply
  • Clayton Silva
    Lender · CA · Member since 2018 · 638 posts · 393 votes
    2y
    Quote from @Jephte Augustin:

    I have a question

    I have property I just acquired and renovated with a Fannie Mae loan. I’m looking to cash out refi, but I have to wait 12 months of seasoning before I can do that.

    Does that seasoning period apply if I cash out refi into a DSCR loan?

    I can see a scenario where I take on the risk of a high interest rate and less flexible terms for 5 years, so I can access my cash sooner if that option is there.

    We can do 80% cashouts with 0 seasoning DSCR.  However the rates with that investor are pretty rough right now.  Or you can wait 3-6 months, get 75% leverage and get much better DSCR rates.  Really depends on what is most important 1) the equity 2) the timeframe, or 3) the rate/terms.
    1Reply
  • Tanner Lewis
    Lender · Austin, TX · Member since 2021 · 448 posts · 441 votes
    2y

    Most DSCR loans only have seasoning of 6 months. There are some products out there for 3 months seasoning as well.

    1Reply
  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    2y
    Quote from @Jephte Augustin:

    I have a question

    I have property I just acquired and renovated with a Fannie Mae loan. I’m looking to cash out refi, but I have to wait 12 months of seasoning before I can do that.

    Does that seasoning period apply if I cash out refi into a DSCR loan?

    I can see a scenario where I take on the risk of a high interest rate and less flexible terms for 5 years, so I can access my cash sooner if that option is there.


     If you can demonstrate that you have completed rehab you can do a cash out refinance with no seasoning required. Terms will get better with 90 days seasoning or doing a no seasoning delayed purchase refinance if you bought this property with your own cash. 

    [email protected]818-269-7983
    LuxePrivate Investments LLC 572 Reviews
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    0Reply
  • Jephte Augustin
    OP
    Lawrence Township, NJ · Member since 2017 · 22 posts · 9 votes
    2y

    @AJ Exner @Miranda Holland @Clayton Silva @Tanner Lewis @Erik Estrada

    Thank you for the insightful replies. I have many more questions from a financing perspective.

    Is a DSCR the best option to bypass the seasoning period or are there better options to recoup that trapped equity?


    thanks

    1Reply
  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    2y
    Quote from @Jephte Augustin:

    @AJ Exner @Miranda Holland @Clayton Silva @Tanner Lewis @Erik Estrada

    Thank you for the insightful replies. I have many more questions from a financing perspective.

    Is a DSCR the best option to bypass the seasoning period or are there better options to recoup that trapped equity?


    thanks


     You can also look into a bridge loan if the goal is to sell the property or if you anticipate rates will come down more. There are no prepayment penalties on these, however you will have a considerably higher rate than going with a long term loan. 

    [email protected]818-269-7983
    LuxePrivate Investments LLC 572 Reviews
    WebsiteView Page
    0Reply
  • Robin SimonBusiness Member
    Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
    2y
    Quote from @Jephte Augustin:

    I have a question

    I have property I just acquired and renovated with a Fannie Mae loan. I’m looking to cash out refi, but I have to wait 12 months of seasoning before I can do that.

    Does that seasoning period apply if I cash out refi into a DSCR loan?

    I can see a scenario where I take on the risk of a high interest rate and less flexible terms for 5 years, so I can access my cash sooner if that option is there.


    Yes, as other people have mentioned - DSCR Lenders have prorprietary guidelines and generally offer more customized and shorter seasoning periods.

    Also check out this article published last year on BP on this exact topic/question - hope it helps!

    https://www.biggerpockets.com/blog/brrrr-loans-what-are-the-...



    BRRRR Loans: What Are the Options, and How Do DSCR Loans Stack Up?

    The BRRRR method of real estate investing continues to be one of the most-used strategies in 2023. With interest rates elevated yet property values remaining resilient, finding cash flow with a reasonable down payment is an incredible challenge.

    However, the BRRRR strategy (buy, rehab, rent, refinance, repeat) makes sense for a lot of investors, as value can be created through forced appreciation (renovations) and capital recycled through cash-out refinances. With rates high and competition fierce, nailing the financing piece of the BRRRR method has never been more important.

    This article will explore the loan options facing BRRRR strategy investors, with a focus on the all-important third R: refinance. Specifically, we'll compare DSCR refinance loans to traditional options, namely bank or conventional loans.

    [email protected]
    Harpoon Capital514 Reviews
    WebsiteView Page
    10Reply
  • Brandon Croucier
    Lender · Lake Havasu City, AZ · Member since 2024 · 700 posts · 284 votes
    2y

    DSCR is the best bet to get something like this done.

    There are products with no seasoning requirements and products with 6 months seasoning.

    0Reply
  • Devin PetersonBusiness Member
    Lender · Sarasota, FL · Member since 2022 · 2k+ posts · 667 votes
    2y
    Quote from @Jephte Augustin:

    I have a question

    I have property I just acquired and renovated with a Fannie Mae loan. I’m looking to cash out refi, but I have to wait 12 months of seasoning before I can do that.

    Does that seasoning period apply if I cash out refi into a DSCR loan?

    I can see a scenario where I take on the risk of a high interest rate and less flexible terms for 5 years, so I can access my cash sooner if that option is there.


    Jephte, you can utilize a DSCR loan here. Some lenders have no seasoning requirements, some have 3 months, and others have 6. Youll have to shop around and compare rate and terms with each option.

    [email protected]860-538-3672
    ProAlpha Capital56 Reviews
    WebsiteView Page
    0Reply
  • Kristie Laufer
    Member since 2024 · 37 posts · 4 votes
    2y

    Seasoning period varies, I'd suggest you shop around and compare rate and terms. Feel free to reach out, I may have lenders that can do this.

    0Reply
  • Givo Aghasi
    Lender · Los Angeles, CA · Member since 2022 · 238 posts · 73 votes
    2y

    Seasoning periods vary, so it's good to shop around and compare. 

    0Reply
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