How quickly can I do a cash out refi

21 Replies

Hi BP, I have been searching, reading, and talking to various people about doing a cash out refi after a cash purchase and receiving a wide range of answers.

I primarily do flips, as it doesn't make sense to buy and hold in my area of CA. I am moving early next year to another market to continue flipping and buying and holding. My plan is the BRRR strategy.

My question is, if I buy a property with cash and do my standard rehab and rent it how quickly can I do a cash out refi?  I only have so much capital to work with right now and I don't want to tie the money up for very long.  I have been told that I might need to wait as long as a year to refi.  That won't work for me at this stage.

What if I was to get a private note on the house from a family member (using my funds) and just refinance out of that into a conventional loan?  Any seasoning period with that?   Would there be any issues using a family member?  

Thanks a lot for your thoughts.

Scott

I'm interested in hearing the answer to Scott's question, but also in terms of what if there wasn't a friends and family option available.  For instance, what kind of bridge loan options are there between the purchase and cash out refi seasoning requirement? 

depends on a lot of things. Your property location, you credit, your networth andbincome, the property financials, type of property. Best case scenario you need to show a signed year lease and get an appraisal for the property. Mine takes about six weeks for the loan process when I wrap up five properties in one loan. I would assume similar for one property.

Thanks for responses.  So, @Nazz Wang and @Darlena, assuming I qualify and am able to get a loan, what is the process you are taking from acquisition?  Can you run me through that?  

I'm just trying to figure out what you guys are doing differently.  

Thanks

I already had a lender in place before I bought my properties.  From there, I gave them proof of ownership (copy of the closing statement), they ordered the appraisal, they loan 85% of appraised value, sign papers, walk away with check. 

Great, Darlena.  So if my lender is saying they can't do that, should I just simply move on to a lender that does?  Are you doing conventional loans or working with a portfolio lender?

 I'm just working with a lender that was referred to me.  She is great, but maybe can't do what I need.

@Scott Rist  I believe the seasoning is 6 months. If I was you, I would contact a few banks to get a baseline on it. Check the local portfolio lending as well as they can be more flexible, because the loan is in house. 

You can typically cash-out refi immediately/any time, but the loan amount will be based on the purchase price or purchase price plus documented repair costs (not the appraisal value, unless is appraises low).  Typically in order to have the loan amount based off the appraisal value, you need to hold the property for 6 months.  With some lenders, this is 12 months.

@Scott Rist

If you buy the home with cash and you qualify for delayed financing you can get 70% back based on the sale price right away.

If you wait 6 months you can get cash out on new appraised value and up to 75%

If you get a loan from anyone you won't qualify for delayed financing and you ll have to wait 6 months for cash out.

Thanks Shaun.  How do I qualify for delayed financing?  Can you explain that a bit more?  So what your saying if I pay 100k cash for a property I can get 70k out with delayed financing?

@Scott Rist

Purchase with cash -- > rehab with cash --> lease out --> talk to lender -- > appraisal --> title work --> Sign loan docs --> receive wire for cash out funds.

A lot of things can go wrong in each of these steps but this is the general process.

Originally posted by @Scott Rist :

Thanks Shaun.  How do I qualify for delayed financing?  Can you explain that a bit more?  So what your saying if I pay 100k cash for a property I can get 70k out with delayed financing?

 There's some good info on it here Scott: https://www.biggerpockets.com/blogs/5110/blog_posts/46871-buy-rent-rehab-refinance-cash-out-refinance-delayed-financing

The link that Kyle J put on here is spot on.  The only thing I can add to that is that article is Freddie Mac now will do up to 6 financed properties cash out.  They just changed their guidelines this past month.  They will also use current rents so Freddie has no more 2 year waiting period.  Just FYI Fannie Mae never had a waiting period.

Great timing for this thread, and awesome responses! Hope you dont mind if I hijack a little, but this is applying to me as well. I was told today that Fannie may won't allow a cash out refi since I had my property listed for sale within the past 6 months. The guideline link posted in this thread says that I can, but it is limited to 70% LTV... guess i need to educate the bank :) I love BP!

Originally posted by @Steve Hannibal :

Here are Fannie mae's requirements:

Fannie mae cash out refinance

It looks like 6 months, but a lot of "exceptions" to that

 This post may have changed my financial future :) I felt defeated earlier today. My banker obviously was wrong. Cant wait to call tomorrow and reference the guidelines. Thanks Steve!