Rental Property Investor · Irvine, CA · Member since 2018 · 3 posts · 0 votes
I just learned that unlike hard money, if I use line of credit to purchase a house, there is no seasoning period before I can refinance the house with conventional loan. What's the pros and cons for using line of credit for BRRRR instead of hard money?
Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
7y
What type of upfront financing you use shouldn't affect the backend financing in any way. If you have X months of seasoning as a requirement from a bank to refinance at appraised value if you get a hard money loan, it should be the same for a line of credit. That being said, hard money is really expensive (usually 3-5 points and 12-15% interest with other fees like an appraisal, processing fees, etc.) whereas a LOC wouldn't have any points and would be a lower rate. If you can get a LOC, I would definitely recommend it.
Rental Property Investor · Irvine, CA · Member since 2018 · 3 posts · 0 votes
7y
Thanks @Andrew Syrios!
What about getting the line of credit from my bank, use it to pay for the purchase and rehab, and then go to a different bank and do LTV cash out financing?
In this case the second bank looks at the transaction as if I made a cash purchase which should qualify for cash out loan without seasoning period.
What about getting the line of credit from my bank, use it to pay for the purchase and rehab, and then go to a different bank and do LTV cash out financing?
In this case the second bank looks at the transaction as if I made a cash purchase which should qualify for cash out loan without seasoning period.
Make sense?
Thanks
That should be fine. We haven't had any problem with cash-out loans generally, and if you explain what you're doing, that should make it easier. But ask the 2nd bank up front if they're willing to do cash out.