BRRR after cash purchase

[Myung Choi]

Just had a cash offer accepted for 3br, 1.5ba home (1671 sq ft) in Rochester, NY (out of state investor). Close in 1 week. First investment property. Awaiting on appraisal to determine property value (after close). I was initially looking to use this home as a LTR for cash flow (COC 8% without property management fee, 4% w/ PM) but now want to BRRR. Third floor attic is finished, so if I added a fire escape I can convert attic to 1 BR (can also add 1 Bath). Just wondering best next steps with regards to using cash versus financing at this point.

[John O'Leary]

You can do a delayed purchase refinance. This involves initially acquiring a property with cash, followed by an immediate refinancing under your lender's acquisition guidelines. This unlocks your initial capital, enabling you to rehab the property effectively. Subsequently, you can transition to long-term financing with a cash-out option. If you are considering traditional financing routes for the long-term phase, be mindful that a 12-month seasoning period is generally required for cash-out refinancing, allowing for proper financial settling. However, many hard money lenders offer a swift pathway to cash out without seasoning, sometimes as soon as 6 months, particularly on a DSCR loan, contingent upon the lender's policies.