I was just wondering how you would go about refinancing a rehab with a conventional mortgage after you completed a rehab. If you wanted to keep the property for a long term investment and rent them out you would have to get different financing than hard money. Are you only able to refinance one or two properties before banks will cut you off or are there different kinds of financing where there is no limit to how many refinances you have? Thanks in advance.
Firstly, hard money isn’t a long term financing option, as most balloon at 6-12 months.
As to your other question (which a bit of a moving target), all banks are different—there are lenders that like to cap you at 4-5 and others that will cap at 10 and a handful that don’t concern themselves with the qty of properties an investor owns.
There is one ARV loan that ideally suited for a buy and hold—allows for up to 80 ARV that is based upon a 1 YR ARM (with reasonable annual and lifetime caps) with a 25 year amortization.
Given the mortgage industry’s current problems, I believe this type of loan program will become a predominant tool for those that can’t nail down an exit strategy (or the cash out refinance piece to recapture capital investment before selling).
Regards,
Scott Miller
bullman,
The timing of your question is perfect. One common approach employs hard money to buy and fix and then some sort of permanent financing to pay off the hard money. Basically, there are two types of permanent types of financing, conforming and non-conforming. When you talk about conventional money, you are typically talking about conforming money. These loans conform to FNMA (Fannie) and FHLMC (Freddie) guidelines. Here’s why your question is so good. Right now, more than ever, seasoning (the time frame from closing to closing) is the main issue. As the non-conforming market continues to crash and burn, loans with “no seasoning” requirements are going away and moving to a 12 month guideline. Conforming loans remain “no seasoning.” So, you buy the house and it takes 30 days to get it rent ready and you want to cash out your acquisition costs. Conforming loans will provide a great solution. Last time I checked, you could only have 10 open mortgages (firsts and seconds combined on all properties owned) to qualify for a conforming loan. There are obviously many more guidelines, but I’d ask your loan officer if he can get a favorable automated underwriting decision for you.
Hope it helps.
-H
With all due respect, your comments are a bit dated and don’t necessarily reflect the current market and/or lender guidelines.
Regards,
Scott Miller