Combining Cash Out Refi W/ HML...

10 Replies

Hello BP,

    I'm primarily looking to buy and hold, but I don't have enough saved up (nor will I in less than 12 months) but while thinking on it today I think I may have found a solution. I'm not sure how realistic it is so I wanted to ask those who have done it.

Is it possible for me to do a fix and flip using a HML, and then get a cash out refinance? I liked the idea because it leaves me the ability to take some of the cash out of the house, while paying back the original lender. Then, I can just make payments on the single new loan, and cash flow the property. However, I've heard about 6/12 month seasoning requirements, as well as waiving those requirements if you just want to be refunded original cost of the house less rehab (not optimal for me, lacking investing capital), and I've also heard this may be avoidable if you are renting out the property. I'm hoping for some clarification here.

   My fiancee and I were considering just turning around and selling our first or second flips just for the cash to pay off some medical collections and beef up our brokerage account, but ideally we are looking to create cash flow, not net worth. Thanks in advance!

Back in the day we used to sell homes to investors with a no money down system and we would put $10k in your pocket. This is still possible to get a HML but you have to have enough equity in the deal and if you borrow " extra " funds for the renovations but dont use them all, your lender might ask for actual receipts showing total spent on renovations. This can get tricky. You need a lender that you can shoot straight with them and tell them what your doing.

Good luck

What about the seasoning requirements? 

It shouldn't take more than a few months for seasoning. Especially if your looking to pull a LOC on the property or mortgage with a local bank. Expect 70% loan to cost (purchase price and improvements).

Originally posted by @Frank R.:

It shouldn't take more than a few months for seasoning. Especially if your looking to pull a LOC on the property or mortgage with a local bank. Expect 70% loan to cost (purchase price and improvements).

Ideally I would like to sell the property, or at least exit the HML to avoid the high payments. However, I don't qualify through traditional credit and income requirements. So, do I have any other options if I can't rehab and sell within six months?

I'm not sure how things work in New York. But in Colorado we do this all day long.

The HML advertises. "rentals with no money down" If you find a property that has a 75% ARV they lend you all the money for home and repairs, at 10% apr 2% origination, they hold in escrow 10% of the loan. Rehab it and refi into a 30yr conventional. if the appraisal is good they return the escrow to you and your into the property for closing and holding costs. look at the merchant mortgage website Denver CO for. I have done this multiple times

Ditto @Evan Cunningham  here in Colorado there are hard money lenders who work with traditional lender partners who don't require any seasoning. It helps you and also helps them be confident that you have an exit strategy on their $0 down loan. Ask around and see if someone local to you has a similar set up.

I'd love to know if anyone is offering this in the Kansas City market. My current lender will lend Purchase price & rehab money up to 85% of the ARV. I was exploring the Homepath investor loans, but they are going away, so I'm looking for more options to expand my buy & hold portfolio.

They are a traditional lendor.  They require full documentation, & sufficient reserves, but are the best option I have found for financing long-term rentals.  They have a max # of these they will do, so after I get 5 loans with them, I'll need a new option.

Join the Largest Real Estate Investing Community

Basic membership is free, forever.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.