My BRRR Success
Super excited as I am closing on my cash out refi tomorrow.
In 2012 I bought a foreclosure in MI for $20k. I put $10k into it and it's renting for $975/mo.
I attempted to do my cash out refi last year around this time and planned to use the money to finance 2 more rentals in MI. So I worked with the loan originators to start the refi and loans for 2 properties, one $45k, the other $47k. The original house appraised at $80k, so I was getting $60k which would take care of down payments, closing costs etc. These properties rent for $875 each. My initial $30k invested would now get $2725/mo in rent.
Unfortunately I didn't find out until it was too late that the lender doesn't do a cash out refi when you have 5+ investment mortgages. The cash out was my 5th so they wouldn't do it. I didn't have the cash in the bank for 2 purchases, so I either had to back out of the deals (and lose my money) or come up with the cash. I decided to take a loan against my 401k as my down payments.
I am happy to say I finally found a lender that would do the cash out on my 5th rental and I can put the money back into my 401k, plus reserves into my bank account.
Lessons for others
- BRRR works
- Be creative
- Keep reinvesting in your business
- Be persistent
- Buy low, refinance high
- Money can be made in Metro Detroit