I'm pretty new to real estate investing (hoping to buy my first property by the end of the year). The part that still confuses me a little is the loan process. Does somebody mind helping me understand the process for financing BRRRR deals OUT of state. Do you have to use a bank in the state that you're buying the property in? What about if you use a hard money lender? For those that use hard money lenders, do you typically get a bank on board with refinancing after you've remodeled, or do you start working with a bank from the very beginning? Do banks lenders have a problem with a fact that you're using a hard money lender for the initial loan?
@Kyle Nield You can use any bank who can lend in that State. You have to know how much you will be eligible for so you don't face problem for refinancing the loan. You should start working before you take a project in your hand. As long you are doing rate and term refinancing you can refinance any time but if you want to cash out you need to wait 6 month under conventional loan.
Thanks @Harjeet Bhatti . I'm assuming there's no seasoning period to cash out if the initial loan is from a hard money lender?
@Kyle Nield if you are in the 1-4 unit space then you can just use a mortgage broker from one of the larger national players for the cash out. My guy works for Loan Depot, and I know he was able to work in most states. For the seasoning period, I am seeing 6 months seasoning still and you will want to make sure your hard money loan is recorded as a mortgage so you don't have issues down the line.
@Kyle Nield No waiting period if its rate and term refinance. You have to wait 6 month if its cash out.
@Kyle Nield thanks for posting. You have some good suggestions above and I just wanted to reinforce to start working with your permanent lender (the REFI step) before you make an offer. We call it getting prequalified. Being prequalified will tell you what your payments, rate, LTV will all be on your REFI step. And that could tell you if you need to modify your initial offer. So if you get prequalified for 80% LTV.....but your property needs 85% LTV to BUY and REHAB....and you want to keep your out of pocket at $0....then maybe we should reduce our initial offer by 5% so you BUY and REHAB at 80%. I hope that makes sense how I am describing all of this.
Anyway, feel free to ask anything additional if you need. Thanks!