How soon can you refinance after the BRRRR strategy?

29 Replies

I will speak on my bank's timeline assuming you are using traditional financing. In my case, if I have all of the information I need (tax returns, PFS, property information, etc...) I turn these around in about 30 days - and have done quicker if my borrower is in a rush. I would need a copy of the executed lease showing that the DSCR covers at 1.2x or better. To determine if your properties would cover the DSCR, most commercial banks will calculate the properties' net income at 70% of the gross rental income (vacancy and expenses). If it's a newer property and significant renovations have been done, we will sometimes use 75% of gross rents. We do not require the property to be seasoned for a certain amount of time if that's your question. As long as the property is leased, we will reimburse/refinance 75% of the appraised value. If you do this right you should be recouping the majority of the cash you have invested. The 30-35 day period would be common for any commercial deal. That accounts for underwriting, waiting on the appraisal, getting the loan approved, collecting due diligence items, and have loan documents prepared for closing. In your case, if the properties are already renovated and leased and the bank is still making you wait to refinance, I would recommend searching for a different bank. but id suggests calling some local community banks and asking to speak to a commercial lender and ask those specific questions. I hope that helps.

@Matty Foley Good info in your post. Seems like your bank offers a good product for refinancing. I think what the OP was asking is what the seasoning period a bank looks for before you can begin the refinance process you outlined. Any thoughts on that?

There aren't a ton of active lenders here on BP (I would imagine the ones that are absolutely kill it with leads) it is always great to get a peak under the hood of how the financing end of the business looks at things. 

For conventional residential loans in your name (not an LLC), my bank says 6 months if just rate and term, 12 months for cash out.

So for one direct lender, seasoning of a cash out BRRR would be 12 months but I've certainly heard of 6.

This same bank was quoting me a 30yr fixed rate of 4% with 2 points on a quad buy with 25% down for reference.  Not sure what commercial terms would be.  Speed usually costs and reporting your financials to them every year sucks.



@Michael Noto thanks Michael! I know it's was lengthy post, but I did mention that we do not require any seasoning period. We feel if the owner has gotten the property leased, they have added value to the property. As soon as I receive a copy of the signed lease I will order the appraisal and get started on the refinance process. Like I said, it's common that 75% of the appraised value, after renovations, will reimburse the borrower close or all of the amount they've invested in the property (assuming they've bought and renovated the property in cash). *I know that many banks do not offer this product and will only advance 75% of the purchase price. It's about finding the right community Bank. Let me know if that all makes sense.

@Matty Foley Last thing: Of course the Borrower(s) would need to be credit worthy and the loan would be subject to underwriting. The subject properties cash flow is the main requirement in starting the process, but we would make sure the Borrower has the financial standing and global cash flow to pay the debt if secondary source of repayment was needed.

Im closing on a refi to a property i bought 5 months ago in a week or so. Paid $135k, appraisal came in at $610k & my lender is giving me 80%. Thought it was worth more from a cashflow perspective, but im glad my bank allowed such a large equity gain in such a short time.

This depends on the product your select.  Conventional or commercial loan and number of units-  I will use 1-4 unit size.

Products we use:

Commercial= no seasoning- rate is about point to point and half higher than typical conventional loan but they will lend 75% LTV 1-4 units They use a section 1007 market rent appraisal, so cost is about $150 higher then typical appraisal. Needs DCSR at 1% the lowest in the industry on the market in my area. Investment property only, 3 year pre payment on it. No tax returns or personal DTI comes into play. Cash out has to be used for business purposes only. Higher closing costs, but still works- Appraisal are coming in decent not many low ones. Min loan amount is 100k- 3 week close. You can close in LLC name or personal name. They do 30 year, 5/1 arm or interest only

Conventional loan- if purchased with cash- you have to wait 6 months- Anti money laundering law, actually alot of medical pot guys are doing this and getting stuck on REFI so having them go commercial. Pot is big in Michigan rate now, the money is flowing. Lowest Fees, best rate on this product. Appraisals are coming in decent, if you your doing some value add. Make sure you document it well. List of repairs nice little folder for the appraiser to document scope of work will get the value higher and LTV. Fannie Mae website is great for guidelines on this one. LTV varies on unit size. Works well 30-45 day closing, no pre payment, we set a 75k loan min. Property needs to be in personal name, all loans are full doc, so tax returns, bank statement, DTI comes into play. They do 5-30 year terms fixed only.

Just an example of my favorite 2 products on market for BRRR, lots of lenders in the market but these 2 close the easiest and quickest that I have used.

@Raul Quezada

We started the refinance before we actually owned the property.

Once our offer was accepted we began the refinance with our lender, a local credit union. We expect to only hold it with hard money for a month or two before the refinance is complete.

@Eric Armstrong

It was a 12 unit motel with a 3br single family attached and a 2 car commercial garage in the rear. I added 2 more bedrooms to the 3br house and converted the garage into 2, 1br suites.

I am currently leasing 12 ex motel units as efficiency units with full kitchens, all utilities and cable/internet included for $650 per mo

The newly constructed 1br suites are renting for $850 per mo everything included

And the 5br single family is currently being rented for $1200

Total yearly gross rents are $128,400. Will net about 90k.

Purchase price was 135k and I put around $120k into it.

Also created a laundry room and vending area which I hope will bring in equivalent to an efficiency unit.

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