Seasoning periods and commercial loans on residential property

[Hamill Alex]

I’m currently in the process of brrring a duplex . It’s the first I’ve done where I’ve actually purchased in cash and plan to cash out refi. However, I have already identified multiple

properties to buy after this and don’t want to wait the 6 month seasoning period to get my cash out. (6 months is federally mandated.) Any creative ideas to circumvent 6 months seasoning for residential financing? If not, what’s the feeling on using a commercial loan for residential properties at a 5, 7, 10 year interest reprice.

[Andrew Postell]

@Hamill Alex yes, you have the first post above 100% correct. Since you filed a lien, it's now a "NO CASH OUT LOAN"...so no seasoning required. That's the precise reason why we do this. Your LLC is acting as your HML. You have all of that 100% correct.

Now OWNERSHIP is ENTIRELY different than lending.  I almost want you to think about who owns the property as a completely different thing than who is responsible for the loan. In theory, you could own the property and I could be responsible to pay the loan.  So ownership is a different discussion.  Fannie Mae and Freddie Mac both address ownership on a "NO CASH OUT LOAN" the same...but for "CASH OUT LOANS" it is different.  For the sake of time, since we are just talking about "no cash out" loans I'll limit to what they say about that subject.

On a "no cash out" loan, the members of the LLC must sign at closing on the REFINANCE step of the BRRRR method. Now, they are not signing on the conventional LOAN...just on the title, meaning the ownership, of the property. So whomever owns the LLC, has ownership rights to the property. Those same individuals would continue their ownership rights on the property at closing. Again, not on the loan, but on the ownership.

I would advise that if the lender you are speaking with does not understand these concepts then we need to look for another lender.  This might be annoying but this is what we need as investors.  We can't work under this whole "waiting 6 months" thing. 

Feel free to keep asking.  Here to help!