Fannie Mae Gives Duplex Investors Independence

Fannie Mae gave Minneapolis duplex investors an early holiday gift yesterday when it announced a change in guidelines to now allow cash-out refinancing within six months of a cash duplex purchase.

Previously, investors who paid cash for duplexes were required to leave all of their equity in the property for a minimum of six months before they could apply for a loan and get their money back out.

For many, this slowed their ability to invest considerably.

Of course, there are still some restrictions. Duplex buyers can’t refinance the property for more than they paid for it, including the amount of their initial investment, financing of closing costs, prepaid fees and points.

The duplex owner must be able to document with a HUD-1 form that they did not use mortgage financing to buy the duplex. Needless to say, the property also needs to be free of liens.

Fannie Mae also stated that if a Borrowerwith multiple properties hadn’t yet reported rental income on tax returns due to length of ownership, leases would now be an acceptable form of documentation.

What this means for investors is they will no longer have to park ample amounts of cash in a single property for an extended period of time. Instead, they will be able to put a loan on the duplex, remove the excess equity, and acquire another property.

Theoretically, anyway, this flexibility, along with rent increases and low vacancy rates, could spur the Minneapolis duplex investment market toward recovery.