After brr a multifamily, how long until you can sell?

Question

At what point can you sell a multifamily building after buy, rehab, rent? Is there seasoning buyers require? Thanks!

Andrew Postell · Answer

@Matthew Barge thanks for posting.  Always great to hear from a fellow Texan.  I think you are asking what do you need to know for "seasoning" if you are flipping?  I mean, if you aren't Renting and Repeating...you are flipping.  So if you purchased a property, improved it, and sell it...the biggest loan you need to know about is FHA loans.  If a FHA buyer approaches you and you owned the property less than 90 days - they cannot buy it.  They would have to wait until the 91st day to start their application to purchase that specific property.  If you owned the property less than 180 days, and are selling it for 100% or higher of your purchase price, then the FHA loan will require 2 appraisals.

However, in just about any other scenario you can sell to a potential buyer.  It is a good practice to call people's lenders on their prequalification letter.  And then you can ask if they have any "rules" around this that you might need to know about as the seller.

I think that answered your question but feel free to reply back if you need anything else.  Thanks!

Andrew Postell · Answer

@Matthew Barge ohhhhhhh, so this is a commercial building.  Ok, that changes a lot.  An very sorry, this is the BRRRR forum, which is for residential stuff.  We call 2-4 unit properties multi-family often...sorry for the confusion.  But yes, you need several things if someone has a loan to purchase this asset.  A "flip" in the commercial world is usually about 4 years...because it takes a while to get rid of the tenants, rehab the property, and generate the 2 years of income to purchase the property.  That's what MOST commercial lenders need to lend on a property - 2 years of rents.  So if you just improved the property, it might take a while to qualify for MOST commercial loan types.  I keep saying "most" because there are some loans that will need a shorter period of time (usually 12 months).  However, the hard thing to know is...what loan is your buyer going to be using?  That's always a hard thing to recognize up front.

There's no restriction on you selling it...just be aware that your buyer's financing might be very dependent on rent rolls with a property of this nature.

Hope all of that makes sense.

Bob S. · Answer

You can sell your property anytime you want. You may have a small " penalty" from your bank if its less then a few months, call your bank

Good luck

Eliott Elias · Answer

No, unless you have a pre payment penalty with your lender.

Stephanie P. · Answer

If there is a large swing in value from when you purchased it to now, some DSCR lenders may not accept the new value or may require a 2nd appraisal which can be expensive when dealing with a multi-family 5+ unit building.

I just spoke with one of my lenders about this topic and he said "As long as there are DOCUMENTED REAL IMPROVEMENTS they would be okay with a new value."  Meaning you would have had to renovate the building to justify a swing in value within the last 12 months and that swing would have to be supported by higher rents.

Matt Barge · Answer

Thanks @Bob Stevens

Matt Barge · Answer

Thank you @Jay Hurst

Matt Barge · Answer

Got it. Thanks @Andrew Postell!

Jay Hurst · Answer

@Matthew Barge   In that case you should have no problems selling the property whenever you would like from a legal perspective. You might check your loan docs to make sure you do not have a pre-payment penalty.

Matt Barge · Answer

Alright, this is a 10-unit multifamily building so it'll probably be a commercial lender if they borrow, so no FHA. Do you know if commercial lenders want to see a certain duration of the new post-renovation performance? Thanks! @Andrew Postell

After brr a multifamily, how long until you can sell?

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