property seasoning Archives | The Cash Flow Company

Understanding whether your rental property fits into a lender’s box is key to getting the financing you need. Each lender has specific requirements, and one of the big ones is seasoning. Let’s dive into what seasoning is, why it matters, and how you can navigate lender requirements for your property.

What Is Seasoning?

In lending, “seasoning” refers to how long you’ve owned a property. From the moment you buy a property, it starts “seasoning” in the lender’s eyes. The longer you own it, the more seasoned it becomes. Lenders often have rules about seasoning, especially when it comes to cash-out refinances.

Example: If you bought a rental property two months ago, it has two months of seasoning.

How Seasoning Affects Your Cash-Out Refinance

If you’re planning a cash-out refinance, most lenders want the property to be seasoned for a certain period. For example, many traditional lenders require 12 months of seasoning before they’ll allow you to take cash out. However, some DSCR lenders, who focus on a property’s income potential, have more flexible seasoning requirements.

Typical Seasoning Requirements:

Traditional Loans: Usually require 12 months of ownership.
DSCR Loans: Often require just 6 months of seasoning.
Shorter Terms Available: Some DSCR lenders even go as low as 3 months and, in rare cases, 0 months.

Why Seasoning Matters for BRRRR Investors

For investors using the BRRRR (Buy, Rehab, Rent, Refinance, Repeat) strategy, seasoning plays a huge role. The goal is to buy, fix, and rent a property quickly, then refinance to pull your cash back out for the next deal. A shorter seasoning period lets you access the property’s appraised value sooner, which is ideal for keeping your investment cycle moving.

Example of Why Short Seasoning Matters:

Imagine you bought a fixer-upper for $275,000 and put $25,000 into rehab. After the work, the property appraises at $400,000. Here’s why you want a shorter seasoning period:

With 12-Month Seasoning: You’d have to wait a full year to access that $400,000 appraisal value.
With 6-Month Seasoning: You could refinance in half the time, freeing up funds to invest in your next project.
With 3-Month or No Seasoning: You’re moving even faster, which is ideal for BRRR investors aiming for quick turnaround.

Find the Right DSCR Lender for Your Project

Not all DSCR lenders are the same. Each has its own box of requirements, including different seasoning rules. Here’s what to look for:

Know the Seasoning Requirement: Make sure the lender’s seasoning timeline matches your goals.
Consider a Broker: Brokers often have access to multiple lenders, giving you options that a direct lender might not offer.
Check for Flexible Terms: Some lenders allow for 0-3 months seasoning, which can be a game-changer if you want to move fast.

The Loan Cost Optimizer Tool

At The Cash Flow Company, we understand that finding the right lender box can be challenging. To help, we offer a Loan Cost Optimizer Tool. This tool lets you compare costs and options across lenders to find the best match for your deal, whether it’s a fix-and-flip, DSCR, or traditional loan.

Ready to Get Started?

If you’re ready to explore your options, visit The Cash Flow Company and use our Loan Cost Optimizer to see where your rental property fits best. And if you have questions, feel free to reach out—we’re here to help you make your investing journey smooth and profitable!

By knowing where your rental property fits in a lender’s box, you can move confidently from one project to the next without delay.

Watch our most recent video to find out more about: Does Your Rental Property Fit in a Lender’s Box?

If you’re diving into real estate investing, you’ve likely heard of “property seasoning.” But what is property seasoning, and why does it matter? Let’s break it down simply so you can keep moving forward with your investment goals.

What Is Property Seasoning?

In real estate lending, seasoning means how long you’ve owned a property. Imagine you bought a property a month ago. At this point, your property is “seasoned” for one month. Lenders care about seasoning because it affects when you can access certain types of refinancing, like cash-out refinancing.

Why Seasoning Matters for DSCR Loans

For DSCR (Debt Service Coverage Ratio) loans, seasoning impacts how soon you can refinance a property using its appraised value instead of the purchase price. This difference is crucial, especially for investors who follow the BRRRR (Buy, Rehab, Rent, Refinance, Repeat) method. Here’s why:

Higher Appraised Value: When you invest in a fixer-upper, you add value through repairs or upgrades. Over time, this improves the property’s worth. After a few months of seasoning, many DSCR lenders let you refinance based on this new, higher value.
Get Cash Out Faster: With DSCR loans, you want to access the property’s equity sooner so you can use those funds on your next investment.

Typical Seasoning Requirements

Not all lenders have the same seasoning rules. Here’s a quick look at common requirements:

Traditional Loans: Many conventional lenders need 12 months of seasoning for a cash-out refinance.
DSCR Loans: Most DSCR lenders require at least 6 months of seasoning, but this can vary.

Some DSCR lenders may even allow:

6 Months – Most DSCR lenders are comfortable here.
3 Months – A few lenders are more flexible with shorter seasoning.
0 Months – Rare, but some lenders allow no seasoning if the property appraises high enough.

Example: Seasoning in Action

Let’s say you bought a property in January for $275,000, invested $25,000 in upgrades, and now it’s worth $400,000. If your lender has a 6-month seasoning rule, you’ll need to wait until July to refinance based on the $400,000 value. With a shorter seasoning period, you could refinance sooner, free up cash, and move to your next project faster.

Choosing the Right Lender

Every lender has its own “box” or rules for lending. If one lender’s seasoning requirement doesn’t match your goals, look for others that do. Working with a broker can also help since they connect you to lenders with various seasoning requirements.

Key Takeaways

Know Your Lender’s Rules: Seasoning requirements vary, especially between traditional and DSCR loans.
Aim for Flexibility: Find a lender or broker who can offer the shortest seasoning to match your investment needs.
Use Tools: Tools like a Loan Cost Optimizer can help you compare loan options and maximize profits.

Need Help with Your Loan?

For more guidance on finding the right DSCR loan or checking on seasoning requirements, visit our website, The Cash Flow Company. With the right tools and advice, you can make smarter, faster investment moves!

Watch our most recent video to find out more!

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Does Your Rental Property Fit in a Lender’s Box?