You purchased a great investment opportunity. You got short-term financing and fixed it up fast and rented it out. Now, you’re looking to refinance into long-term financing and take some cash out.
But you run into a problem: cash-out refinance seasoning.
Seasoning rules say you have to wait anywhere from 3-6 months after purchasing a property to take cash out, and now 12 months for conventional.
But seasoning doesn’t have to stop you. Here’s how.
Cash-out DSCR loans, no seasoning
Debt Service Coverage Ratio loan approval is based on a rental property’s cash flow, not your personal income.
If the property receives higher rent than its full payment, it will likely qualify. That’s why this loan is a favorite of self-employed real estate investors.
But most DSCR lenders require cash-out seasoning of 3-6 months.
One lender we found does not.
OfferMarket (an REInvestor Guide lending partner) can do a cash-out refinance with no seasoning whatsoever. Even if you just rehabbed and rented a property weeks after acquiring it, you might still qualify.
“A lot of investors buy a property and want to free up cash to further build their portfolios,” says Dan Sperling-Horowitz, founder of OfferMarket. “They quickly find out that most DSCR lenders require six months of seasoning.”
Sperling-Horowitz goes on, “With our no-seasoning rule, an investor could potentially acquire 20 properties over five years instead of 10. BRRR investors should not be penalized for efficiently rehabbing and renting properties.”
Offermarket’s program can also help those refinancing a Fix & Flip loan, or those who paid cash and are now seeking reimbursement plus additional cash based on the new value.
Cash-out DSCR requirements
This cash-out DSCR program is unique in the marketplace, and surprisingly, the requirements are not prohibitive.
Credit score: Minimum 680
Loan-to-value: A maximum 75% LTV is allowed
Proof of value-add: You need to provide before and after photos proving you’ve added value to the property
Lease: You don’t need a signed lease and proof of security deposit. However, you may want to supply these to get the best DSCR loan rates.
Occupancy: Investment properties only. No owner-occupied homes.
Existing lien: Those with an existing loan are eligible, as are those who paid cash and have a free-and-clear property.
Getting cash out on a free-and-clear property with no seasoning
Many investors pay cash for homes. Often, this is the only way to acquire a foreclosure or another high-potential property.
Without a cash-out program, though, the best the investor can do is get some of their cash back with a rate-and-term refi.
This unique no-seasoning DSCR bases the new loan on the after-repair value (ARV). And, yes, this is true even if the home is worth a lot more after rehab.
More about DSCR
The DSCR loan has gained in popularity among investors in 2022 and 2023 because it requires no tax returns or any personal income documentation.
Instead, the property’s cash flow determines eligibility.
A property with $1,500 per month in rent and a $1,250 payment has a DSCR of 1.2 and would likely qualify.
The investor’s tax returns, W2s, or paystubs are never requested or reviewed.
DSCR loans open up new opportunities for value-minded investors who can spot a cash-flowing property, even in this tough market.
DSCR cash-out seasoning FAQ
Most lenders take 30-60 days to close a cash-out DSCR loan. No-seasoning cash-out loans typically takes just 15-25 days, according to their website.
According to them, they’ve worked closely with many BRRR investors, analyzed the data, and concluded that most seasoning requirements are unnecessary. Being investors themselves, they realized the value they could add by offering a loan of this type.
Investors can expect to pay 8-9% for a no-seasoning cash-out DSCR loan, according to OfferMarket’s website, as of the time of this writing. Rates can be higher or lower depending on the current market and your loan scenario.
Waiting for your cash-out refinance? That’s no longer necessary
Waiting around six months for a cash-out loan on your rental property is an inconvenience of the past.
Get access to your “trapped” cash the minute you rehab the property with this new program.
