Using first deal to fund next?

8 Replies

Ok bought my first investment!!!! House appraised for $75,000 I purchased for 65,000 with 20% down so financing $52,000. Currently rents for $1200/$300 a room to college students. I’m needing to figure out my next step to use the equity to fund my next property. I should be able to get a 80% loan on my equity for down payment on next property correct? Would this be considered BRRRR or should I try & refinance this property after I make some improvements. I have built in equity from the purchase & he doesn’t need a ton of work right now.

@Jessie York BRRRR is just a cute term used to describe the strategy real estate investors have been using forever. You leverage the equity in your existing property as a down payment (or partial down payment) into your next asset. Rinse and repeat.

If you just acquired the property, you might want to season the loan for a few more months (check with your lender). Also refinancing and/or getting a new loan isn't free. You will be charged points and other expenses. So do a break-even analysis to make sure you are in a beneficial situation.

Thank you Omar! I didn't know about the fees. I've put in my first offer on an investment property (short sale) and was planning to use the built-in equity to purchase my next place, assumming all goes well. Now I know it's not quite that straightforward. 

Also, you don’t get to borrow 75% “of the equity”. If you qualify, you can refinance up to 75% Of The Value. So, that number, less your current loan balance and refinance fees is what cash you could get out (much less than 75-80% “of your equity”).
I’m surprised someone let you tie up a short sale without showing the ability to buy.

Again, you can't borrow "75% of the equity".

$75,000 @ 75%= $ 56,250

You could refinance for $56,250 after 6-12 months.

56,250-52,000=$4,250 cash out, less refinance costs of maybe $2k.

It's not going to make sense.