I was told by a lender that due to regulations with Fannie Mae and Freddie Mac, I cannot refinance on a property with a cash out until I’ve owned the property 6 months. (I can refinance sooner than 6 mo but only for the payoff amount.)
Our strategy was to refinance within about 3 months and use the cash out (the difference between what we owe and about 75% LTV) to put into our next property and keep acquiring at a decent pace.
For those who are doing BRRRR, are you refinancing with a cash out before 6 months? If yes, than how are you doing it?
Short answer is to move to private money or a portfolio lender, as they have no such seasoning requirements. I hope that helps.
As you mentioned, a refinance has no seasoning. A cash out refinance is a 6 month waiting period if you initially used financing. If you go the route of hard money or private money, or some other sort of lien on the property, you can refinance out prior to 6 months, with no cash back.
@Charlotte M. Varble If you are going to continue at any sort of scale you'll eventually end up in the commercial lending arena. There are some down sides and additional expenses when dealing with commercial lending but the upside is there are generally no seasoning requirements so you have much quicker access to the equity. More than once I have gone straight from the closing table to the bank to initiate a refi that same day.
For now you're probably better off waiting out the 6 months and taking advantage of the better terms you're getting but at some point you will start buying properties using your LLC and embrace the world of commercial loans.
I would change your strategy to allow for a 6-12 month time table to stabilize and increase your available funding partners to continue on with the strategy. I have also come across appraisers that give me a hard time when the purchase price is so much less than what I am shooting for on the refinance. 9 months seems to be kind of a sweet spot, there are a lot of lending options out there, people are going to their local banks, or utilizing companies like ROC capital have been helpful. Make sure you are EXTREMELY clear with what you are wanting for the refinance, Loan to VALUE not loan to cost, I've had some lenders promise me one thing, and then try to close the deal another
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