DSCR: You Must Own a Property THIS LONG Before Refinancing

What is Seasoning?

In simple terms, seasoning is how long you need to own a property before refinancing it. If you bought a property one month ago, it’s been “seasoned” for one month. Each lender has its own requirements, and they vary depending on the type of loan and lender.

For example:

• Traditional Lenders: Often require at least 12 months of ownership before allowing a cash-out refinance.
• DSCR Lenders: Typically require a 6-month seasoning period, though some allow as little as 3 months—or even none!

Why Does Seasoning Matter for DSCR Loans?

With DSCR loans, this affects your ability to use the appraised value of the property rather than the purchase price. This can be a big deal for investors aiming to get back their investment and move on to the next project. Here’s how it works:

• After Rehab Value: When you’ve put work into a property, it often increases in value. These rules impact whether you can refinance based on this new, higher appraised value.
• Cash-Out Timing: The sooner you can refinance based on the higher value, the faster you can reinvest in more properties.

Example:
Let’s say you bought a property for $275,000, put $25,000 of work into it, and now it’s worth $400,000. To pull your money out at this new value, you’ll need to meet the lender’s seasoning requirement.

DSCR Loan Seasoning Requirements: What to Expect

While each lender has its own rules, here’s a typical breakdown of the requirements:

1. 6-Month: Most DSCR lenders require you to own the property for at least six months.
   • Example: If you bought the property on January 1st, you could refinance it as early as July 1st.
2. 3-Month: Some lenders allow a shorter 3-month seasoning period.
   • Example: If you closed on January 1st, you could potentially refinance by April 1st, depending on the lender.
3. No Seasoning: A few lenders have no seasoning period at all. These lenders allow you to refinance based on the current appraised value as soon as the rehab is complete.

Tips for Choosing a Lender Based on Seasoning

Every lender has a “box” of rules, and not all lenders are the same. Some are flexible with shorter seasoning periods, while others stick to strict timelines. Here’s how to find the right lender for your goals:

• Know Your Timeline: If you’re in a rush to get your cash back, look for a lender with shorter seasoning requirements.
• Shop Around: Different lenders offer various seasoning terms, so it pays to shop around. Brokers can be a big help here, as they have access to multiple lenders.
• Use Tools Like the Loan Cost Optimizer: A tool like The Cash Flow Company’s Loan Cost Optimizer can help you compare costs and find the best fit for your loan needs.

Why Shorter Seasoning Matters in the BRRR World

If you’re using the BRRR strategy, shorter seasoning periods allow you to:

1. Get Your Cash Out Faster: Quickly pull your investment back to fund the next deal.
2. Maximize Profitability: Refine properties quickly, avoid delays, and keep projects moving.
3. Stay Flexible: Adapt your lending strategy to different project timelines and goals.

Example in Action:
You buy a property in January, renovate it in February, and get it rented by March. If your lender only requires three months of seasoning, you could refinance by April, freeing up your funds for your next purchase.

The Key Takeaway: Find a Lender that Matches Your Needs

When picking a lender, make sure their seasoning period aligns with your goals. Don’t be stuck waiting months to refinance when you’re ready to move on. Whether it’s a 6-month, 3-month, or no-seasoning requirement, the right lender can help you get your cash out faster, keep your BRRRR projects rolling, and ultimately reach your investing goals sooner.

For more guidance, check out The Cash Flow Company’s tools or reach out to talk through your options. With the right lender on your side, you can make the most of your DSCR loan—and your investments!

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