The Vacant Refinance Rule: Seasoning, Leases, and the Rehab Exception

Rule

Lendency generally requires a fully executed long-term lease for any refinance transaction where the property has been owned for more than 180 days. Properties owned for 180 days or less (from acquisition date to note date) may remain vacant, provided a current rent listing is verified.

The Rehab Exception: If you have owned the property between 6 and 12 months, we will permit the property to be vacant for the refinance if a renovation or rehab project was recently completed (defined as completion within 45 days of the loan application). Documentation of the completed work will be required.

Lendency Insight

Stabilization is the goal of any DSCR loan. Usually, that means a rent-paying tenant is in place. However, we recognize the "Value-Add" strategy where an investor buys a distressed property, renovates it, and seeks to recapture their capital through a "BRRRR" (Buy, Rehab, Rent, Refinance, Repeat) strategy.

Waiting for a tenant to move in can sometimes cause a liquidity crunch for active investors. By allowing a vacant refinance for recently rehabbed properties (completed within the last 45 days), we allow you to pull your equity out as soon as the paint is dry. This bridges the gap between the end of construction and the start of a lease, helping you move on to your next acquisition faster.

Common Scenarios & FAQs

  • I’ve owned the property for 8 months and it's vacant. Can I refinance? Only if you just finished a rehab project. If the rehab was completed within 45 days of your application, you can proceed while vacant. If the property has just been sitting vacant without recent work, a lease is required.

  • What documentation is needed for the rehab exception? You should be prepared to provide a summary of the work completed, potentially including contractor invoices, permits, or "before and after" photos that coincide with the appraisal inspection.

  • What if I’ve owned the property for only 3 months? Properties owned for 180 days or less are permitted to be vacant without the rehab requirement. You simply need to show that the property is actively listed for rent.

  • Does "recently completed" mean the day I apply? It means the work must have been finished no more than 45 days prior to your initial loan application date. If the rehab was finished 3 months ago and the property is still vacant, it no longer qualifies for the exception.

Key Definitions

  • Seasoning (Ownership): The length of time a borrower has held the legal title to a property.

  • Delayed Purchase: A refinance transaction that occurs shortly after a cash purchase, often used to "pull out" the initial capital.

  • Note Date: The date the mortgage note is signed, which marks the end of the "ownership seasoning" calculation.

  • Acquisition Date: The date the borrower originally took title to the property.

  • Stabilized Property: A property that has completed its renovation phase and is either occupied by a tenant or is in a condition to be occupied immediately.

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