Current seasoning period for a refi out on an 8-unit?

Question

Hi all,

Browsed several posts in this section, but didn't quite get my query answered and would like up-to-date responses.  If I missed a current post, please feel free to link it to me.

Anyway, I'm currently evaluating an 8-unit complex that should offer me the ability to refi my money back out of the deal.  We're looking at using a commercial loan for acquisition, and then a refi at the new appraised value to pull out our original money.  The work involved is mostly raising rents, and I'd guess maybe $25k-$30k in capital improvements to update some units on turnover.  Most of the units on on MTM leases, so rent bumps can theoretically happen pretty quick.  When talking to a loan broker, he said I should expect a 12 month seasoning period, starting at acquisition.  Does this sound right?  I'm hoping to get the property stabilized and flowing in a much shorter period, and would like to be able to refi to pull out the money sooner (like 6 monhts), if possible.

Insights are appreciated. Thanks.

Kevin Dougherty · Answer

Your broker is correct, the average seasoning period for most traditional banks is 12 months. There are many alternative lenders who will allow refinancing inside of 12 months once the property cash flow starts trending upward from events such as rental increases and/or rental improvements. There are plenty of commercial finance brokers on here who can assist you. Talk to a couple and compare their services. Once you have the property under contract you can start collecting terms and conditions from these brokers and choose the one that fits your needs. It will be hard to obtain accurate rates and terms until the lenders have all of the information on you the borrower and the subject property and they don't usually provide rates and terms until you control the property.

Good luck

Stephanie P. · Answer

There are different tiers of money out there.  Banks are about the most stringent and are top tier for this type of lending, but they have pretty tight guidelines regarding cash flow, seasoning, borrower experience etc...Then there are other lenders out there that are a little less stringent and only really care about location (must be in a metropolitan area/not rural), occupancy, whether the property cash flows and the borrower's credit.  Those lenders really don't care about seasoning as long as the other factors are solid.

Stephanie