Cash out refinance question

6 Replies

Let's say you buy a property from MLS cheap enough to BRRRR and get your money out. Property condition was good enough so you used a conventional loan for the purchase, then paid cash for the rehab.

Is there gonna be a problem if you try to cash out refinance just after 6months of initial purchase? I am looking for any lender restrictions that I might not know of. I know most people use private or hard money so I wanted to know if using conventional loans for acquisitions make a difference in the BRRRR process.

Thank you!

@Bernard Sanga In theory that works (I've done that). Talk to a conventional lender now to understand if they will finance the final project. Many get stuck buying a $30K house, put $30K into, ARV is say $75K and the bank won't do it because the loan value is too low. Also, know that rates can move on you too!

@Bernard Sanga

You can buy conventional, fund the rehab and refinance 6 months later. The difficulty with this, is the property must not be in that bad of condition so not sure how much forced equity you can get. Your also paying closing costs twice. If the numbers work then start calling lenders. I use to be able to get 75%-80% cash out refinance, now it's down to 70% of ARV.

Originally posted by @Whitney Hutten :

@Bernard Sanga In theory that works (I've done that). Talk to a conventional lender now to understand if they will finance the final project. Many get stuck buying a $30K house, put $30K into, ARV is say $75K and the bank won't do it because the loan value is too low. Also, know that rates can move on you too!

The ARV is gonna be 300+k so its should be fine in that respect. Got my lender on the phone today, sounds like this could actually work! Thanks Whitney!

 

Originally posted by @Kenneth Garrett :

@Bernard Sanga

You can buy conventional, fund the rehab and refinance 6 months later. The difficulty with this, is the property must not be in that bad of condition so not sure how much forced equity you can get. Your also paying closing costs twice. If the numbers work then start calling lenders. I use to be able to get 75%-80% cash out refinance, now it's down to 70% of ARV.

Yeah, I bought a triplex that has 2 buildings. A side by side duplex and a 2 storey building with a shed on the bottom unit. I am finishing the shed and turn it into another unit, adding 700+ sq ft to the property. I talked to 2 lenders so far and it seems like 70% is the best they can do. Is the 75-80% you were getting before on sfh or multi units as well?