house won't appraise to full ARV if refi before seasoning period?

Question

Hi members, I'm doing a BRRRR on a SF. buying ($60k) it using a personal loan and plan to refinance (ARV $80k) it from a local lender after rehab ($5k). rehab duration would be a month.

I want to refinance asap after rehab but I've heard that the house won't appraise to its full ARV if refinanced within the seasoning period of 6 months and that you've to wait out entire seasoning period to appraise to full ARV. Is this accurate? Or does this only apply if you're refinancing it from the same lender? Where would I find accurate info for this question. Kindly advise. Thank you.

Nick Belsky · Answer

@Vidyadhar R.

Delayed or Deferred Financing will solve this issue for you. A personal loan can be seen as a Cash Purchase. You have up to 6 months to Refinance and are able to recover up to 80% of the new appraisal amount, provided is does not exceed the initial purchase price. It is essentially a cash-out refi. The purpose of these are to be quick and help investors recover their cash so they can roll into another deal quickly.

Look for lenders who offer delayed financing. If you are still within the 6 months of your purchase, you still have time.

Cheers!

Andrew Postell · Answer

@Vidyadhar R. this is completely dependent on your lender that you are using in the REFINANCE step. And the answer here is that we ONLY want to work with lenders that use full After Repair Value right away.

Part of the proper steps to a successful BRRRR is getting prequalified. This will tell you what is possible on your end. So speak with a lender right away. I wrote two posts that I think might be important for you to read here:

1. How to properly structure a cash purchase HERE

2. How to find real estate investor friendly lenders HERE

Kris L. · Answer

@Kris L.

Should be my BRRRR projects tend to need about 6 months of work.

Kris L. · Answer

@Vidyadhar R.

The 6 month seasoning period is something you will run into for almost any conventional refi, as it’s a federal regulation for Fannie/Freddie loans. There may be some lending institutions that aren’t planning on selling your mortgage on the secondary market that would not require a seasoning period, but I haven’t found one myself. As most of my BRRRR projects need about months of work anyways, I haven’t honestly looked super hard (I tend to flip the smaller projects). There is something called delayed financing that might be a viable option, but it’s not something I am too familiar with.

house won't appraise to full ARV if refi before seasoning period?

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