Refinancing Rental Property

12 Replies

I have a rental property that I would like to refinance and cash out for a downpayemnt on a second property. I bought this property last month.

1.How soon can I refinance rental property after purchase?

2.Any one knows good lenders around Atlanta area, I can use for refinancing ?

Typically a year or 2 or enough equity to match up with the new appraisal price. Typical cashout refi is 70% LTV.

What type of property is it?  You usually need 6 months to a year of "seasoning" or name on title but certain property types there are not seasoning requirements.  If it is stable and fully occupied you have a better chance of having a shorter length of ownership needed.

Chamara,

Call on credit unions in your area or local community banks. They may portfolio the loan and not require any seasoning period to cash out refinance based on fair market value. 

@Chamara Edirisinghe @Bob Green makes a good point- local banks that offer portfolio loan products will often refi without seasoning at all. Here are a few things to consider with them though.

-Even if they offer an immediate cash-out refi, a lot of them will not do so based on the market value of the property, but rather the purchase price. That means if you bought your property for 70k and it's really worth 100k... even if it appraises for 100k they will only give you their standard LTV percentage of the 70k purchase price. You may have to do a little more digging to find one that will allow you to take out debt so quickly after with non of your own skin left in the game.

-When you do find one that will refi based on property value, take a close look at terms. Often times, these banks that lend their own dollar to give you flexible terms will do so as a commercial loan. This may often mean lower LTV (70% instead of 75%), shorter amortization schedule (20 or 25 years instead of 30), slightly higher rates, and they will almost always require recourse even on an SFR. Take these into consideration- if you property's pro forma is strong and cash flow checks out these shouldn't sink you.

***As far as finding a bank goes, this is a simple process (especially in a huge city like Atlanta) but takes a bit of elbow grease and sales effort. I would suggest putting a very nice clean pro-forma report of your current property together, as well as for the property you want to purchase. Maybe even create a very simple "business plan" illustrating what you plan to do in order to continue financing through them with loans that you will easily perform on. Also, local banks care about relationships so offering to transfer your deposits through them (plus other services you may use from your current bank) will incentivize them to work with you more. Lastly, be salesmanlike in your approach. Go online and make a list of local banks in the area. Get 10 or 20 to start with. Then put together a nice clean email template and send it to a bunch of their business bankers. Follow that up with a phone call to each branch until you find one or more that are willing to work with you, and decide which you think will be best.

Good luck!

I can't speak to seasoning requirements, but I just did a decent cash-out refi with Fidelity Bank/Mortgage in Decatur.  Very professional, smooth and fairly fast -- highly recommended if you qualify.  The qualifications & terms were standard Fannie/Freddie (with all the millions of financial documents required), but they're servicing the loan in-house.  I've owned this property for almost 2 years though.

Originally posted by @Chamara Edirisinghe :

I have a rental property that I would like to refinance and cash out for a downpayemnt on a second property. I bought this property last month.

1.How soon can I refinance rental property after purchase?

2.Any one knows good lenders around Atlanta area, I can use for refinancing ?

HI Chamara,

On a conventional financing basis you can refinance as a rate/term 1 day after you close . If you want to refinance and get more money back than you're paying off (aka a cash out refinance) then you'll need 6 months of being on title. These two responses assume you buy it with a loan or some note that was recorded against the property.

However, if you bought the property with all cash (no note/loan recorded against the property) then you can do a DFE or delayed financing exception like others have mentioned above. There are pros and con's to DFE. The pro's are a reduced waiting period to recoop your money which is normally 6 months but with DFE you can start and fund it immediately to do a cash out refinance 1 day after closing. The con's is that DFE is limited to 70% of your ARV or your acquisition cost (purchase price + closing costs only - cannot include rehab costs) whichever is lower typically if you buy a good deal your cost will be lower. If you buy a deal where 70% ARV is higher then you have to question your value and comps =D.

Where I am I at, we can lend in GA.

Best regards,

Originally posted by @Chamara Edirisinghe :

Hi Albert  -

I bough this house using credit line .

6 months period you are mentioning is that apply in this scenario. 

Thanks

Chamara

Chamara

If you bought the house with a credit line and there is no mortgage lien against the property, it would be treated as a cash transaction.  You should be able to cash out up to the purchase price bearing in mind the applicable ltv restriction based on units. 

Stephanie