Refinancing Rules?

I have found a hard money lender to work with me on my investement property acquisition. The terms aren’t great, but I am thinking if I can refi quickly, I can have better cash flow. I am working with $147,000 loan from hard lender at 15% for 5 years amortized for 20 years, with the owner financing the balance.

At what point should I be able to refinance the package? I am not looking to cash out, just get better terms and interest rate. I am not really sure how the refinance process works; the criteria to determine whether I can refinance; and how soon I can refi after the acquisition.

It sounds so simple to go buy with a hard money loan and then quickly refinance an investment property. Most lenders want the loan to be seasoned or to have it effect for at least one year. The second issue is that most lenders will only refinance at 60-70 LTV on investment property. A third issue that no one ever talks about is a ‘refinance’ appraisal is often lower than a ‘sale’ appraisal. I know some people will probably argue that is not the case. Is your property going to go up in value to justify a higher appraisal?

Another question are the rents below market value? If you have higher rents that means higher property values. If that’s the case the lender may want seasoning on the higher rents or a long term contract. If you can quickly refinance why not go to the bank for a conventional mortgage now?

I have typically bought distressed to severely distressed houses and then rehabbed them to justify a refinance. This has worked well for me since I did most of the work myself to raise my equity stake in the property. I had little money to work with in the beginning but I was committed to succeed and pushed myself hard. You need to know the truth real estate investing is not easy work and you earn every dollar you make.

In the Real Estate game it is never as easy as many people make it sound but you can succeed. If you can make an adequate ROI with a hard money loan go ahead with the deal but plan on the refinance to take longer than expected. There is always a way to make it happen, just because it may be difficult don’t quit and say it can’t be done.

good luck!

You should be able to do a rate and term refinance as soon as your rehab is complete. As stated above it will only be for 70-75% of appraised value.

Also make sure your HML doesn’t have a prepayment penalty.

Hello Pete,

Question concerning your comment:
You should be able to do a rate and term refinance as soon as your rehab is complete. As stated above it will only be for 70-75% of appraised value.

Where can I find a rate and term refinancing? Do you have someone you use. I am in Utah. (If there not servicing this area they might be able to lead me to someone).

My Struggle…With the refinancing into a permanent financing…

As I am looking around I am being told that within the first 12 months that lenders are going to go off of the purchase price and not do an appraisal. Obviously its hard to hold HM for 12 months…Kind of a Rock & Hard Place. :bobble

Do you have any leads?.. that would be great…?

Thanks, Joe


I just saw your message in my inbox after I sent this post here…Thank You!