Best way to cash out Refi a BRRRR

3 Replies

Here's my situation. I'm planning on trying out the BRRRR method to acquire my next rental. I'll be buying the house in my name (no LLC) and I'll be using a HELOC from my primary residence.

Am I correct in assuming my two options are to wait the 6 months and get a conventional cash out refi mortgage, or to find a portfolio lender who can refi before 6 months, but the interest rate will be a little higher? What has been your experience?

@Nolan M. Using a small bank is your best option. You are more likely to find local banks allowing you to cash out refi before 6 months. As long as you calculate positive cash flow with the higher interest rate, I would recommend choosing this option. You will be able to refinance sooner if and when needed.

Best of luck!

If you are using the HELOC to buy the next place with all cash, meaning there is no loan recorded against the property, then you can use the Delayed Financing provision. This enables you to refinance before the six month window. If you do have a loan recorded agains the property, then you have the six month wait to refinance.

Hopefully the following will post in a reasonable fashion.  If not, I looked up delayed financing on the Fannie Mae site.



The original purchase transaction was an arms-length transaction.
For this refinance transaction, the borrower(s) must meet Fannie Mae’s borrower eligibility requirements as described in B2-2-01, General Borrower Eligibility RequirementsThe borrower(s) may have initially purchased the property as one of the following:
  • a natural person;
  • an eligible inter vivos revocable trust, when the borrower is both the individual establishing the trust and the beneficiary of the trust;
  • an eligible land trust when the borrower is the beneficiary of the land trust; or
  • an LLC or partnership in which the borrower(s) have an individual or joint ownership of 100%.
The original purchase transaction is documented by a settlement statement, which confirms that no mortgage financing was used to obtain the subject property. (A recorded trustee's deed (or similar alternative) confirming the amount paid by the grantee to trustee may be substituted for a settlement statement if a settlement statement was not provided to the purchaser at time of sale.)The preliminary title search or report must confirm that there are no existing liens on the subject property.
The sources of funds for the purchase transaction are documented (such as bank statements, personal loan documents, or a HELOC on another property).
If the source of funds used to acquire the property was an unsecured loan or a loan secured by an asset other than the subject property (such as a HELOC secured by another property), the settlement statement for the refinance transaction must reflect that all cash-out proceeds be used to pay off or pay down, as applicable, the loan used to purchase the property. Any payments on the balance remaining from the original loan must be included in the debt-to-income ratio calculation for the refinance transaction.Note: Funds received as gifts and used to purchase the property may not be reimbursed with proceeds of the new mortgage loan.
The new loan amount can be no more than the actual documented amount of the borrower's initial investment in purchasing the property plus the financing of closing costs, prepaid fees, and points on the new mortgage loan (subject to the maximum LTV, CLTV, and HCLTV ratios for the cash-out transaction based on the current appraised value).
All other cash-out refinance eligibility requirements are met. Cash-out pricing is applicable.
Originally posted by @Nolan M. :

Here's my situation. I'm planning on trying out the BRRRR method to acquire my next rental. I'll be buying the house in my name (no LLC) and I'll be using a HELOC from my primary residence.

Am I correct in assuming my two options are to wait the 6 months and get a conventional cash out refi mortgage, or to find a portfolio lender who can refi before 6 months, but the interest rate will be a little higher? What has been your experience?

 Just buy it and wait the 6 months. Conventional financing is cheaper. The only reason to use portfolio lender is when you can't or don't want to qualify for Fannie/Freddie or a local bank.  This is coming from a portfolio lender.  Take the cheap money first.

Stephanie