I'm analyzing my first BRRRR project. I found a bank here in town that will do a variety of portfolio loans. I was explaining the project and asked how soon I could get my cash back out assuming I had more than 25% of final ARV. She said delayed financing and cash out refi were basically the same and I had to wait six months. It's not a deal breaker, but I would rather have my cash back out immediately if that's an option. From the podcasts I've heard and the posts I've read, I'm assuming that is an option. Can someone help me out here? Or at least explain the pros and cons of each? Thanks much.
delayed finance is a bit of a niche product so finding lenders that don't know how to use it is common
delayed finance will remove the seasoning period BUT you have to pay CASH for the property (borrowed capital will not work), if you have this option you can also roll insurance and rehab expenses onto the HUD-1 if you're willing to pay it all up front. If you then create 25% equity, so your all-in cost is 75% LTV you can extract 100% of your funds with no seasoning. The devil is in the details here
6 month seasoning BRRRR is far easier and allows for a lot more options but......gotta wait 6 months lol
your local portfolio lender may have options in between these 2 approaches.
The requirements on a cash out refinance require 6 months on title and you can pull out 75% of the appraised value. Delayed on the other hand has a different set of rules which I will outline. If you pay cash for a property you can pull out up to your original purchase price, roll in the closing costs with a loan to value not to exceed 75% of the appraised value. Their is not 6 months seasoning requirement with Delayed Financing. Lets utilize an example, you pay 50K for a house and put in 10K in repairs and the appraisal comes back at 100K. With Delayed Financing you can only receive back the 50K which was the original purchase price.
there are more then just standard agency loans do you research to learn more, find out what your purpose is to cash out.. if its to purchase more real estate, then i suggest using Blocs
She said delayed financing and cash out refi were basically the same and I had to wait six months.
Assuming you are a TRUE cash buyer, that is not correct. Find a new lender, or better yet an independent mortgage broker who can cut through lender BS 20x faster than you as a consumer can, with wholesale rates to boot.
I am in this very situation. From my understanding is that within 6 months your only options is to refi a percentage (not sure how much because i am not choosing this option) of the purchase price of the home.
I have decided that i will most likely go through a lender for a "Rental Loan" to pull the money out quick to get started on the next project.
there are more then just standard agency loans do you research to learn more, find out what your purpose is to cash out.. if its to purchase more real estate, then i suggest using Blocs
delayed finance is a bit of a niche product so finding lenders that don't know how to use it is common
delayed finance will remove the seasoning period BUT you have to pay CASH for the property (borrowed capital will not work), if you have this option you can also roll insurance and rehab expenses onto the HUD-1 if you're willing to pay it all up front. If you then create 25% equity, so your all-in cost is 75% LTV you can extract 100% of your funds with no seasoning. The devil is in the details here
6 month seasoning BRRRR is far easier and allows for a lot more options but......gotta wait 6 months lol
your local portfolio lender may have options in between these 2 approaches.
@Nate Fanara How are you approaching your deal with financing, can you explain?
I plan on going to a hard money lender for a "Rental Loan". This acts as a means for me to get my money back (granted higher apr +fees) quicker than waiting the 6 months. Then, in the future should you want to get out of that high APR you could always refi again with a conventional lender.
@Mike Rutherford Fannie does delayed financing within the first 6 months of the purchase at 75% LTV of the purchase price, the good part is that you get the same rate as a purchase and not a refi cash out which would be higher. If you need to to cash out based on the new appraised value then you will need to wait for the 6 months seasoning. That's your best option as rate on conventional will Be much lower as well as lower closing costs compared to subprime market. So obviously if you plan on holding this property for few years, it makes sense to wait the 6 month rather then getting a high rate on subprime
@Mike Rutherford Chris' comment was 100% on point. You are working with the wrong lender. As a mortgage broker myself, there are plenty of programs out there that allow for cash out refinances on investments with 0-90 days seasoning. They even go based on stated income and are solely based on the income generated by the property, assuming that these are rentals.
These types of programs normally have a higher rate then normal conventional financing, but if the numbers still make sense and there is cash flow then why not... You will normally be capped at 70-75% cash out those which is pretty basic across the board.
Take your cash out now and then when 6 months hits refinance for a lower rate with conventional financing.
@Mike Rutherford Chris' comment was 100% on point. You are working with the wrong lender. As a mortgage broker myself, there are plenty of programs out there that allow for cash out refinances on investments with 0-90 days seasoning. They even go based on stated income and are solely based on the income generated by the property, assuming that these are rentals.
These types of programs normally have a higher rate then normal conventional financing, but if the numbers still make sense and there is cash flow then why not... You will normally be capped at 70-75% cash out those which is pretty basic across the board.
Take your cash out now and then when 6 months hits refinance for a lower rate with conventional financing.
Nicholas, Id like to pick your brain on those lenders you speak of.