Cash Purchase, Then REFI = What is the timing from Bank on REFI?

Question

Hey BPer's

I am working on my strategy for scaling and I am just curious.  If I am making an all cash purchase on a property and want to REFI my way out of it in a short period of time, I am wondering what is the typical timing the bank would want to see?

For example:

• Purchase: $10-30k
• Initial Improvements: $10k
• ARV = $50k
• Lease is fulfilled (i.e. tenant is in the property)
• Appropriate length of Time before approaching the bank to REFI = ?

I am not sure if there is a specific length of time that the banks like to see or not.  Any advice would be greatly appreciated.

Another question would be, is there any concerns on the amount of the principal?  Let's assume that I would get REFI at 70% ARV = $35k.  Would I have to use a HELOC instead?

Thanks

~ Shaun

Mayank S. · Answer

@Shaun Palmer typically the seasoning period for some banks is six months, for others it may be a year. If you are planning for cash out refi then it has some limitation on number of mortgages on your name. I believe if you have six or more mortgages on your name then cash out wouldn't work due to limitation imposed by Fannie.

There is something else called delayed financing exception that doesn't have any seasoning period requirement  or other limitation, you can refinance immediately after buying and rehabbing the property. The only main difference is the LTV that is permissible. In cash out ltv is based on appraisal value however delayed financing allows financing 70-75% ltv based of the purchase prices. I am not a lender however @Jerry Padilla is a great resource and lender who can clarify the question in detail. check out this link:

https://www.biggerpockets.com/blogs/5110/42824-all-about-delayed-financing

You can use HELOC or any other fund to buy the property for cash if that's what you are asking.

Shaun Palmer · Answer

@Mayank S.

Very helpful information. Thanks for sending this over.  It sounds like I might need to use a HELOC in combination with REFI as a strategy.