Dekalb, IL · Member since 2013 · 4 posts · 3 votes
I am currently rehabbing an REO property that I paid cash for. Once it is finished, I am going to keep it as a rental property. Obviously I want to get my money back out of the property so that I can invest it in more properties. Why is it that NO ONE will refinance unless you have owned the home for a year? How is anyone supposed to invest if they have to tie their money up for an entire year? I certainly don't want to pay a hard money investor 15% plus points for a year...anyone have any luck??? Or answers for that matter?
delayed financing is 75% and no seasoning. add your rehab to the settlement statement and you can get it all back at once.
Wait, so you can finance the rehab cost for delayed seasoning? So if I buy a house 50k, put in 25k, I can cash out (50k * 0.75 + 25k) immediately after the rehab?
yes. commonly overlooked for some reason
the rule is 75% LTV or 100% of HUD
so before you close on the house, get the rehab invoice to the closing attorney and have them put it on the hud. then you pay UP FRONT and the disburse through escrow.
then when you go to rehab, your settlement statement is cash outlay plus rehab. I recommend lining up this with your lender before hand so everyone knows the strategy going into the deal.
Lender · Glenview IL- CDLP NMLS#230554 · Member since 2015 · 2k+ posts · 747 votes
8y
@Mckinley Baggett You can cash out as soon as you finish rehab under delayed financing exception. You don't have to wait because spend cash initially. But you can cash out whatever you spend initially. After 6 month you can cash out 75% of appraisal value for 1 unit.
@Mckinley Baggett You can cash out as soon as you finish rehab under delayed financing exception. You don't have to wait because spend cash initially. But you can cash out whatever you spend initially. After 6 month you can cash out 75% of appraisal value for 1 unit.
Can you clarify your language? Isn't it the original purchase price only that you can refinance under the delayed refinance option, not "whatever you spend initially" on rehab and purchase price. Because I can spend 40k on a paint job (if I wanted to) and no lender would cover that expense under delayed financing exception loan on top of my purchase price.
@Mckinley baggett My standard practice is to wait 6 months to get the cash out refi per lender seasoning requirements so I could get the unit appraised and take out the ARV vs. only the initial price. I have 1-2 months for rehab and then time for placing a tenant, so it comes pretty soon after so its not a unreasonable wait. Also, you can engage your lender early 45-60 days out to begin underwriting the loan from the 6 month requirement and arrange settlement to occur right around the 6 month mark. That saves another 1-2 months of waiting for underwriting that has to be done regardless.
Financial Advisor · Des Moines, IA · Member since 2017 · 173 posts · 58 votes
8y
@Mckinley Baggett - You have options within the commercial lending space. You can get up to 75% of appraised value after 6 months and up to 70% after one month. Every lender has different seasoning requirements. But there are options.
Lender · Glenview IL- CDLP NMLS#230554 · Member since 2015 · 2k+ posts · 747 votes
8y
@Jeff Bridges Lets say you purchase this house for $30000+closing cost= $33000. You spend on rehab $10000. Your appraisal is around $50000*70%= $35000. You spend initially $33000 so that will be max cash out for you.
Lender · Frederick/ Falls Church DC, Maryland & Virginia · Member since 2014 · 794 posts · 612 votes
8y
Try small local banks, their seasoning periods are usually 6 months or so. Once you build a report, it can be even quicker.
Also many hard money lenders have rental hybrid products now. Better to use that option at the beginning of the project vs refi'ing into one but it is an option. Lastly the days of 15% plus points are long gone unless you are looking for 100% financing or have horrific credit. Hard money cash out refi in this case should be 8-9.5% and 1-2 points.
@Mckinley Baggett You can cash out as soon as you finish rehab under delayed financing exception. You don't have to wait because spend cash initially. But you can cash out whatever you spend initially. After 6 month you can cash out 75% of appraisal value for 1 unit.
Hi Harjeet,
MB (your bank) actually told me their seasoning is 1 year, is that a state-by-state thing or did maybe I misunderstand?
@Mckinley Baggett You can cash out as soon as you finish rehab under delayed financing exception. You don't have to wait because spend cash initially. But you can cash out whatever you spend initially. After 6 month you can cash out 75% of appraisal value for 1 unit.
Hi Harjeet,
MB (your bank) actually told me their seasoning is 1 year, is that a state-by-state thing or did maybe I misunderstand?
There is no seasoning ever for the delayed financing exception assuming you paid cash for a property.
@Mckinley Baggett You can cash out as soon as you finish rehab under delayed financing exception. You don't have to wait because spend cash initially. But you can cash out whatever you spend initially. After 6 month you can cash out 75% of appraisal value for 1 unit.
Hi Harjeet,
MB (your bank) actually told me their seasoning is 1 year, is that a state-by-state thing or did maybe I misunderstand?
There is no seasoning ever for the delayed financing exception assuming you paid cash for a property.
I meant 1 year seasoning for a cash-out refinance based on post-rehab appraised value for a property bought with cash. Sorry should have been clearer.
delayed financing is 75% and no seasoning. add your rehab to the settlement statement and you can get it all back at once.
Wait, so you can finance the rehab cost for delayed seasoning? So if I buy a house 50k, put in 25k, I can cash out (50k * 0.75 + 25k) immediately after the rehab?
delayed financing is 75% and no seasoning. add your rehab to the settlement statement and you can get it all back at once.
Wait, so you can finance the rehab cost for delayed seasoning? So if I buy a house 50k, put in 25k, I can cash out (50k * 0.75 + 25k) immediately after the rehab?
yes. commonly overlooked for some reason
the rule is 75% LTV or 100% of HUD
so before you close on the house, get the rehab invoice to the closing attorney and have them put it on the hud. then you pay UP FRONT and the disburse through escrow.
then when you go to rehab, your settlement statement is cash outlay plus rehab. I recommend lining up this with your lender before hand so everyone knows the strategy going into the deal.
Lender · Glenview IL- CDLP NMLS#230554 · Member since 2015 · 2k+ posts · 747 votes
8y
@Nicky Reader No you can refinance under delayed financing exception any time. Otherwise after 6 month on appraisal value. We lend in 46 States, Ohio is one that State.
@Nicky Reader No you can refinance under delayed financing exception any time. Otherwise after 6 month on appraisal value. We lend in 46 States, Ohio is one that State.
Thanks. I wonder why my MB guy told me it was 1 year for on appraisal value. Had to go with a different bank.
Dekalb, IL · Member since 2013 · 4 posts · 3 votes
8y
Wow. I really would like to thank all of the people that replied to my post. All of the replies or very insightful and inspiring. Good luck on your next deals.
@Alexander Felice
Where can you find a bank that will add the rehab costs in delayed financing? Been looking everywhere
Thanks!
bank shouldn't matter much. Ask them if they will lend on line 120 of HUD-1 (..pretty sure it's 120)
This process is a bit out of the box, which lenders are not usually a fan of. Bankers love IN THE BOX processes, so it might take some relationship building. I have written about this topic extensively, much of it on the BP blog ;)
@Alexander Felice
Where can you find a bank that will add the rehab costs in delayed financing? Been looking everywhere
Thanks!
bank shouldn't matter much. Ask them if they will lend on line 120 of HUD-1 (..pretty sure it's 120)
This process is a bit out of the box, which lenders are not usually a fan of. Bankers love IN THE BOX processes, so it might take some relationship building. I have written about this topic extensively, much of it on the BP blog ;)
Thanks for your response and I really enjoyed your podcast!
Is there a difference in just going to a portfolio lender who has 0 to 30 day seasoning? Why didnt you go that route?
delayed financing is 75% and no seasoning. add your rehab to the settlement statement and you can get it all back at once.
@Alexander Felice I'm reincarnating this thread. If I understand this correctly (and I'm going to go back and re-listen to #301)… your approach is genius. A few questions so I'm clear: 1. If I buy a house for $55k, it needs $25k in reno, I'll throw BOTH the $55k on as the Contract Sales Price and the $25k to cover the quote from my contractor for the entire reno budget on as Settlement Charges to Buyer, bringing the Gross Amount Due from Buyer to $80k. As long as the appraisal is $106,666.67 or higher ($80k/0.75) I'll be able to pull all $80k back out via delayed financing? 2. Any reason why, if you have a line of credit purchasing this (and no mortgage from the original purchase) that this wouldn't work? and 3. I assume this is regardless of state since it's Fannie/Freddie?
delayed financing is 75% and no seasoning. add your rehab to the settlement statement and you can get it all back at once.
@Alexander Felice I'm reincarnating this thread. If I understand this correctly (and I'm going to go back and re-listen to #301)… your approach is genius. A few questions so I'm clear: 1. If I buy a house for $55k, it needs $25k in reno, I'll throw BOTH the $55k on as the Contract Sales Price and the $25k to cover the quote from my contractor for the entire reno budget on as Settlement Charges to Buyer, bringing the Gross Amount Due from Buyer to $80k. As long as the appraisal is $106,666.67 or higher ($80k/0.75) I'll be able to pull all $80k back out via delayed financing? 2. Any reason why, if you have a line of credit purchasing this (and no mortgage from the original purchase) that this wouldn't work? and 3. I assume this is regardless of state since it's Fannie/Freddie?
Thanks in advance.
Kyle
this is correct.
you can use a line of credit as long as it's YOURS (HELOC, SDIRA, etc). you cannot use hard money or outsided borrowed funds. the lender will source the payment origination.
and yes it's a fannie mae product so state doesn't matter
Specialist · Louisville, KY · Member since 2017 · 166 posts · 154 votes
7y
@Alexander Felice Awesome. May be a stretch of a question, but, if an SDIRA is used, are you barred from personally collecting cash flow that the rentals kick off (meaning, does 100% of ALL revenue/profit have to go back into the IRA)? Thank you again, Alex.
@Alexander Felice Awesome. May be a stretch of a question, but, if an SDIRA is used, are you barred from personally collecting cash flow that the rentals kick off (meaning, does 100% of ALL revenue/profit have to go back into the IRA)? Thank you again, Alex.
this is not an area I'm familiar with. I believe what you said is correct, you cannot personally take profits from the SDIRA but you should talk to someone who really knows.