By Scott Bialek
Experience can be a great teacher, but it can also be the slow road to success. As an unseasoned investor 20 years ago, I knew the direction I wanted to go and had a plan for getting there, but there were some things I didn’t know. I started by finding a solid first property and thought I’d buy it, fix it up, refinance it at the new appraised value, and pull out my cash to buy the next property. But there was a sharp bend in the road. Imagine my disappointment when, after that first investment, I learned that I wasn’t getting my cash out for 6-12 months! I discovered conventional and portfolio lenders both required a “Seasoning Period.” Having equity tied up with no way to access it was an early, unexpected hurdle and a definite speed bump to my investing success. It wasn’t the spice of life sprinkled on my investing plan. It was a complete roadblock to growing my portfolio – and it left me with a white-knuckled grip on the wheel!
Seasoning was an industry term I wasn’t familiar with. I knew mortgage lenders used appraised values to determine original loan values and that upgraded properties carried new current appraised values. What experience and research had not yet taught me was that seasoning was the length of time between when an investor (or home owner) financed a property at its original purchase price and when they could refinance it at the new current appraised value. I expected to quickly refinance and have the cash that came out to be the nut for my next investment property. I had no idea how long I’d have to wait for it.
I was in a crash course learning that lenders believe the purchase price is the best barometer for the value of a property and that only after time passes can a lender be comfortable providing a loan based on a new appraisal. Lenders also view the passage of time as a protection from having an inexperienced investor purchase a property, pull out their cash, and then struggle to rent or sell the property. Conventional lenders who sell their loans to Fannie Mae or Freddie Mac typically require a six (6) month seasoning period. Portfolio lenders go further and often require a full year before investors can access the cash from a refinance.
As years passed, I saw that this was a long-standing problem. I cannot tell you how many calls I received from real estate investors who bought a house with cash (or a hard money loan) with the intention of increasing the property’s value and using the cash from the increased value to fund their next investment. When I explained seasoning to them, there was always a long, uncomfortable silence as they processed the fact that their money would be tied up much longer than expected.
With a few years and many miles in the rearview mirror, the road to real estate investment success became navigable. My own early struggle led me to consider options that would clear the road for other investors. I’m pleased to announce that we now have a cash out investment property refinance program with no seasoning period. That’s right – purchase the property, fix it up and get your cash out now, not in 6 or 12 months. With full access to funds and nothing standing in the way, our customers can be unstoppable as investors. That makes for an easy drive in the fast lane of the road to success.
Feel free to contact me directly at my email address to learn more about our program or call us at 877-292-7350.
About Scott Bialek
In addition to being one of the founders of Hurst Lending, I am also a real estate investor. I have a portfolio of residential and commercial properties. I love helping investors build their portfolio and I am happy to help provide advice and suggestions on how to make money investing in real estate that go well beyond what a typical lender can provide. My philosophy is to take advantage of the current, still relatively low, interest rate environment to build a portfolio of high-quality real estate that will pay off over the long term.
Please feel free to contact me directly if I can help provide a loan for your next purchase or refinance, or even if you just want advice on how to get started or expand your real estate investing activities.
Scott E. Bialek
Co-Founder, Hurst Lending & Insurance
*Please note that this article is not intended to provide legal advice. You should contact your own attorney to understand the legal protections that are available to you when you purchase real estate.