Brr Financing Question

5 Replies

I have a question that i'm sure has been answered but I cannot find about financing and re-financing. 

Lets say I want to buy a fixer for 50k and I want to put 20% down and go through a local bank. Then rehab and prep the property for rent in 8 weeks and I want to get it appraised and refinanced so I can get my money out. It sounds like if I financed this loan initially, that bank may appraise and re-finance my property after a 6 month seasoning period right? But that means my capital is tied up for a least 6m.

Assuming the above is true, how are investors able to get a house, rehab it and refi it so quickly? Are they buying with cash first then leveraging deffered financing? (ive heard there can be weird HUD rules with this that can prevent you from getting market value, but I could be wrong) Are they using short term loans with higher rates for a few months then flipping over to conventional?

I am in a situation where I have the capital for 20% down and rehab costs, but i'm not able to buy the house for cash too yet. 

Thanks for the help

Evan,

There are private lenders that will refinance investment property without any seasoning.  The property must be rented but other than that there is no seasoning requirement.  Local banks and Fannie / Freddie have their many hoops to jump through but they are not the only game in town.

Paul.

@Evan Shuey You could do a fix n flip loan for the purchase/rehab using 10% downpayment on total costs (purchase price + rehab budget). This loan will finance 90% of the purchase and rehab, so you don't have as much money tied up. At 90 days you can refinance up to 75LTV of new appraised value into a long term (30 year) loan assuming rehab is complete and property rental ready.

Originally posted by @Evan Shuey :

Thanks folks. This is very helpful. 

Is the 90 days just a min time limit for the loan issuer to make it worth their while?

Evan

This is really a math problem.  You can get 70% loan to value portfolio money based on the new appraised value with no seasoning, but the rate and terms are going to be significantly higher than Fannie and Freddie money.  You could wait 3 months and do a little better or wait 6 months and get conventional financing.  The real question is this: Do you need your cash now?  If yes, then you take it knowing that waiting would have saved you x dollars.  

These loans get done all the time.

Stephanie