I'm working on buying another rental property and would like to use the Brrrr method but haven't done it in the past. Looking for a mentor/partner, and advice. Thank you!
No offense, but people asking for a mentor and advice on here are a dime a dozen. I'd recommend educating yourself with the multitude of resources BP provides such as the ultimate beginners guide, podcasts, blogs, searching forums about BRRRR, networking and analyzing specific deals that you may be interested in before bringing it to someone with more experience looking for something in return. People are more than willing to help, but you're way more likely to get some help by asking offer something specific of value in return(secret apartment shopper, painting, marketing properties and/or future leads etc.)
I have had many clients that have succeeded with the BRRR method all of the country. Typically, they come to me at or right before the 6th month mark to get the maximum amount of cash back. After 6 months, and prior to a year, if you can show improvements / renovation to the property than you can cash out on the current appraised value of the property.
- The typical cash out financing is done after 6 months of owning the property, based on ARV and available for mortgaged properties #1-10. Delayed financing is for less than 6 months after closing and only if you paid cash. Delayed financing also limits you to a max of the purchase price to receive as cash back.
- On a primary residence you can pull out up to 80% LTV on a SFR and up to 75% LTV on 2-4 unit multi-families.
- On an investment property; A SFR if you have #1-10 mortgaged properties, you can pull out up to 75% of the equity and on 2-4 units is up to 70% equity.
- On an investment property; If you have #7-10 mortgaged properties, including subject you are required to have a credit score of 720.
I am glad to send you more info on the BRRR strategy if you wanted more info.
@Brandon Capelle I do the BRRRR strategy in the metro and would be happy to help you figure it out.
The key to the strategy working for more than one deal is to buy right (a deal). You've got to buy at a good discount to retail. Buy a fixer upper where you can afford the down payment PLUS the rehab budget. Your capital will be tied up until to refi to get some of it back out. If you buy low enough, you could even get all of your original investment out.
Risks are the following:
- appraiser games. They love to be conservative, even where there are good comps that support a higher valuation. They are anchoring at what you paid for the place 6 months ago.
- A market correction could reduce the number of good comps and stop your strategy in your tracks.
- Rising interest rates.
- refi mortgage payment will be higher than original one. That eats $150 -$250 into your cash flow so you need to plan for this up front making sure you will have plenty of cash flow AFTER you get the refi.
Its tough to find deals but that's key to being able to make this work.
I agree on the above comments regarding a mentor - there are many people on here looking for the same and your only way to find someone would be to offer them something of value (good deal). Your best bet is to research in on here and get comfortable with the strategy. The most important part is finding a deal that will work after paying additional financing costs, etc.
I am not sure if the 6 month time period gets around this but we have been limited to the lower of appraisal or 70% of purchase price on one loan in the past. The house appraised for $200k but our purchase price was $110k so they limited us to a loan of $77k... We didn't have a prior loan, we owned the house free and clear. This was probably 8-10 yeas ago, maybe things have changed or maybe the banker shoehorned us into a loan that worked best for them.
Hi Brandon - I just finished up the brrrr strategy on my single family home and am now doing airbnb to offset the second mortgage payment. I would be more than happy to share things I learned along the way. Shoot me a private message if you want to get coffee or do a quick phone call to chat through any of it. Happy to help :)