We are planning to purchase a foreclosed 4-plex with hard money because it needs about $30k worth of repairs. When the work is finished, we want to finance it into a permanent loan and get cash out to move onto another property (the BRRR strategy). Will conventional lenders require the loan to season for 6 or 12 months, or will we be able to get financing in, say, 3 or 4 months?
Depends on a couple of factors, namely the loan program, and the bank's tolerance. Your best bet is to be talking to banks prior to doing any exit strategy.
At this point, I would be talking to local banks and their loan underwriters to see what your best bet is for the refinance.
Keep detailed records of any work you do (financial and photo), and create a "brag book" that you can bring with you to your banker to make your point.
When you are putting your numbers together for a fix/flip include the maximum cost for your financing, and don't try to skimp on those numbers. If you have 1 year hard money, assume that it will take 1 year to do the project and figure all that in. You might be done sooner, but every once and a while, you could run long. it's a great piece of mind knowing that you have as much breathing room as possible.
In that vein, I always recommend getting the longest term loan available, and paying it down on the shortest schedule possible, assuming no net negatives to the prepayment.
Hope that helps.
Thanks for your reply, Jim. I wasn't very clear: we are planning to buy and hold, just using hard money to purchase quickly without worrying about pre-closing repairs. We will use our own cash for repairs after the loan is in place, then refi for the long term. I was told by a loan broker that federal guidelines say we have to have the original purchase loan (in this case, the hard money loan) in place for 12 months before we can get cash out conventional refinancing. I don't think that's true, but thought I would throw it out there. It sounds like you're saying individual banks might have different seasoning requirements.
If you purchase using a mortgage secured by the property in question, HML or otherwise, six months seasoning for a cash out refinance, assuming you want a Fannie/Freddie loan and that there are no overlays.
@Chris Mason, I am running into the issue of rehabbing in an LLC, and not being able to cash out refi because of seasoning - the lender wants 6 months in my personal name. I wonder if some rules just changed. This didn't seem to be a problem before.
The only type of refinance I know that can be done in less than 6 months with a conventional lender is a Rate & Term refinance. If you want to do that, then getting a rehab loan would actually be to your benefit; anything that increases the loan amount means you get to keep more of your cash and the refinance would completely pay off that loan.