BRRRR Financing Help

11 Replies

Hello BP! Those of you that are actively trying to BRRRR how are you able to refinance in under 6 months?

I'm currently looking to purchase a single-family with hard money, but all the mortgage brokers/bankers are all selling the notes on the secondary market and want 6 months and 1 day to start the application process to refinance.

I'll be purchasing in Missouri but have a reputable project manager that I'll be working with. He anticipates the work to not go past 3 months. Assuming we can start the rehab the same day we close it would be ideal if we could refinance sooner than 6 months. So how is it done?

Thanks!

@Tyson R. you are looking to do delayed financing. It allows you to refinance in under 6 months. That is what you need to be asking the banks about. if they do delayed financing. you should google it and make sure you understand what you will need to do. keep in mind that most lenders will do 75% LTV or 100% of HUD whichever is lower. so that means that you want to try and include any rehab funds on the HUD statement. Which means you will need to have them when you close and place them in escrow and then draw out to pay the contractor. This could be more complicated then you are ready for but it is how you refi before the standard 6 month seasoning.

Originally posted by @Tyson R. :

Hello BP! Those of you that are actively trying to BRRRR how are you able to refinance in under 6 months?

I'm currently looking to purchase a single-family with hard money, but all the mortgage brokers/bankers are all selling the notes on the secondary market and want 6 months and 1 day to start the application process to refinance.

I'll be purchasing in Missouri but have a reputable project manager that I'll be working with. He anticipates the work to not go past 3 months. Assuming we can start the rehab the same day we close it would be ideal if we could refinance sooner than 6 months. So how is it done?

Thanks!

 Yes! They are a few but they do exist. 

They are niche lenders that have products for the RE Investor.

1, 3, 6-month seasoning. Non-Owner Business purpose Cash-out refi or just Refi.

Arm, 30 years R/T, and IO. Full Doc light Doc and no Doc with low DCR (1%)

@Tyson R. First off where at in Missouri are you purchasing? We use the BRRRR model, and have good relationships with some local banks here in Saint Louis, I would be willing to connect you with them.

Most banks are going to do a 65%-80% LTV, make sure that it is a loan to value (appraised) not loan to cost, which means that you will recoup 75% or so of the money you have into the deal. Always look for loan to value refinance approaches.

In regards to the timeline needed to refinance this is very heavily bank dependent. We work with some banks that require a 12 month seasoning period, meaning that the property has been rented and performing for the last 12 months. We do have banks that do not have a seasoning period, and will loan up to 80% LTV. This is astounding. Essentially as soon as it is rented and performing (after your rehab and is rented out) then you are able to start the refinance process.

Some banks also have a minimum that you can refinance on a commercial loan (this is what we use a commercial loan on a residential property) and may need to group several properties together to reach their threshold, sometimes $250k.


Let me know where the deal is at, and I will try to get you a contact.


@Luke Teson I'm looking in North Kansas City and Independence. Single-Families around the 80K mark with 20-30K with ARV around 135. If you know of anyone that extends that far from St. Louis let me know.

The "Loan to value" that you recommend is great advice. Thanks.

@Tyson R. are you just looking to just refinance your Hard Money loan?  If so, delayed financing does not apply.  Delayed Financing is for scenarios when you purchased a property with cash.  It sounds like all the lenders you are asking to do a "non-cash out" refinance are still saying 6 months?  If so, then you CERTAINLY need to try to find different lenders.  It is hard to know which lenders are good, you have some good suggestions above for sure but I would highly recommend that you ask some specific questions to make sure your lenders:

Questions for Lenders

  1. When do you start using rental income to help me qualify? (the answer needs to be immediately)
  2. When do you start using “After Repair Value” on my property?
  3. How long do you need me to be on title to refinance? (this is important if you do need a short term loan to purchase then refinance out - and the answer should be 1 day...very important that it is 1 day on title is all that is needed to refinance)
  4. What is my minimum down payment required? (if they only require 15% down on a single family home that is usually a good sign that you are working with a flexible lender)
  5. How many loans can I have with you?
  6. Can I change title to my LLC?
  7. Do you sell your mortgages?
  8. What is your loan minimum?
  9. Can you explain to me what your reserve requirements are?

If I am misreading what you are saying please let me know.  Can certainly answer any questions you have on this.  Thanks!

Originally posted by @Tyson R. :

Hello BP! Those of you that are actively trying to BRRRR how are you able to refinance in under 6 months?

I did it in less than a month of getting the property in Tallahassee, FL on a SFH. You can do it just takes sometime to find the right financial partner for the refi.

@Guifre Mora @Tyson R. I am not very familiar with Banks outside of Maryland/DC/VA, but it's commonplace in these areas for the bank to require no seasoning period. My bank, as well as many of the banks I often compete with, will start the refinance process the very same day the property is leased. So maybe it's rare in some places, but I wouldn't understand why that would be the case. call the community banks near you and talk with a commercial lender. Do this a commercial loan and I'd bet you find a bank within your first few calls. Good luck.

Try your local credit union, but really why worry about it. A few months is nothing and will be here in no time. I would wait and find the lender with the best terms rather than seasoning requirements. You are thinking short term vs long term. Would you rather get a loan 2 months earlier but pay an extra 50 bpts over the life of the loan?

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here