BRRRR - Hold requirement before cash out refinance?

Question

Is there a time requirement of how long I have to own a property before I can do a cash out refi?

Assumption is I am doing a BRRR.

Example:

Month 1: Buy property and rehab it (est 30 days)

Month 2: get it appraised after rehab.  Can I get the cash out refinance at this point assuming the appraised value is actually higher?  This the property would be owned by me for only 2 months here.

And finally if there is this type of time requirement is it lender or product specific?

Jared Hottle · Answer

If you are trying to get fanny mae financing on the refiance you will probably need to wait 6 months. If you are using an in-house product with commercial financing talk to the bank. I have heard some doing it as soon as you want. Some having a seasoning requirement.

Andrew Postell · Answer

@Corbett Brasington thanks for posting!  Always great to hear from a fellow Texan.  Bigger Pockets does have some good state specific forums and Texas is their most active forum.  Feel free to post there if you ever need some more "local" advice about things.

Now, in theory, you should NOT have any seasoning on your BRRRR transaction.  That is, as long as you structure it correctly.  So in theory, a short term lender (Hard Money for example) should lend you 75% of the ARV on the property.  Now, when you go to REFINANCE that property, you will also receive 75% or maybe 80% of the ARV on the refinance step (basically enough to roll in closing costs at 80%).  So there won't be an opportunity to get cash out in that scenario.  Most cash out limits are 75% anyway.  In that scenario, there's no seasoning, no waiting, you can refinance right away.

Where I see some investors get tripped up is when they DON'T take the maximum amount in the beginning.  Sometimes they feel that if they take less then they save a few bucks on interest.  It's not worth it.  So if this is your scenario, tax the max amount in the beginning and everything will work out fine.

I hope all of this makes sense but feel free to ask anything additional if  you need.  Thanks!

Nick Belsky · Answer

@Corbett Brasington

If you paid cash, you can use delayed financing with Fannie or Freddie financing.  You must do so BEFORE 6 months.  It is basically a cash out refi.

If you have a mortgage, standard seasoning on title is 6 months.  I've got one now that I have to wait until 11-29 to close on due to seasoning.

Cheers!

BRRRR - Hold requirement before cash out refinance?

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