Investor · Santa Fe, NM · Member since 2016 · 221 posts · 152 votes
Hi,
I'm under contract to purchase my first deal, a 4-plex in Albuquerque, NM for $117K. It probably needs about $30K in rehab.
I have my own cash to purchase and rehab the property, and then I can do a cash out refinance in 6+ months. Essentially this would follow the BRRRR strategy.
I don't feel that I should go out and get investors for my first deal, I need to get some experience first.
I could perhaps do some other financing types, like purchase with cash and get a HELOC for the rehap to preserve some of my cash.
Rental Property Investor · Corrales, NM · Member since 2016 · 114 posts · 28 votes
10y
The BRRR method sounds pretty solid to me. I would only HELOC if you have a place to use the cash. With the BRRR you'll get to pull your money out then.
Investor · Coeur d'Alene, ID · Member since 2016 · 551 posts · 218 votes
10y
I wouldn't want my cash tied up, I would try to do a conventional 30yr fixed loan and then refi when I finished my rehab or after the title seasoning period. This way I'd only have to put up 25%-30% of my purchase price. This assumes that you are not strapped for time as a cash purchase will be a quicker close, sometimes anyway.
Investor · Santa Fe, NM · Member since 2016 · 221 posts · 152 votes
10y
@Mike Hanneman wouldn't you end up with two closings and associated costs if I got financing for the purchase price and the a refinance after the rehab?
Investor · Coeur d'Alene, ID · Member since 2016 · 551 posts · 218 votes
10y
That is true you would in most cases have to pay two closings, you could get a LOC after your rehab as they don't usually charge of closing fees on a LOC.
It depends on how fast you buy deals that you find, sometimes paying $3K -$5K in closing for being able to keep your cash for other deals is worth it.
Investor · Holly Springs, NC · Member since 2016 · 18 posts · 14 votes
10y
Assuming you are looking to buy and hold: Interest rates are historically low right now. There is a lot of value in keeping your money free for other projects. I would recommend going for a 15 or 30 year fixed rate (depending on whether you need the greater cash flow or are looking to build faster equity), and put the minimum down payment you could without paying PMI (generally 20 or 25% down is required by banks on an investment property). Because rates are so low, you could conceivably just keep this mortgage forever (thus avoiding double closing costs), and simply use your other money to buy the next one and the next one. Depending on cash flow for each, you will be accumulating additional money as well, which can be used for future purchases and/or improvements.