Obtaining our first BRRRR

8 Replies

My wife and I have partnered and completed a flip with around 10% return on our money invested. I am wanting to build a rental portfolio of single family houses with the BRRRR method. We are wanting to acquire properties without partnership but not for sure how to obtain without having surplus capitol to purchase outright. We are not really interesting in house hacking. Any feedback would be great.

Some people use hard money lenders, but I believe if you do then you have to hold the property 1 year before doing a cash-out refi.

I personally believe buying in cash is the way to go. Are there any cheap areas near you that would have a lot of C class rentals? A real fixer in an area like that might be cheap enough for you to buy in cash and then use whatever short term credit lines you have available to complete the rehab.

I've recently found a lender that will do 80% ARV at 7% for 60 days while we rehab and then refinance at the end of 60 days into a long term note. I haven't used that method yet but plan to on the next one.

Prior BRRRR's I've done have been with a partner to split costs and spread the work between us. It's worked well for us and we've both learned a lot from each other and the experience that I think has accelerated our learning curve and ability to move quickly.

Good Luck!

Thanks Kevin and David. I appreciate your input. Is it possible to take out a loan to purchase a C class property, rehab, then refinance for ARV? Also, are the properties you are buying foreclosed or just finding cheaper houses on MLS.

@Cody Burke

What you described is how I BRRRR. I buy using a commercial loan for SFH from a local credit union which allows 20% down on purchase and cover 100% of repairs per contractors quote. I then refinance once repairs are done at 80% of appraised value. On my last property, I purchased on March 5th, rehabbed, and rented it out on May 1, started refi loan on May 3rd, and closed cash out refi May 24th.

@Anna Buffkin   Are you getting the quotes from the contractor before you get the commercial loan or  guessing rehab cost and getting loaned that amount?  Is there no grace period that you have to have the property rented out before refinancing?  I'm just trying to figure out the best way without needing a bunch of capital for cash purchase.

@Cody Burke

I turned in the contractor estimate with the loan application.  I've been using the same contractor for 5 years so it was no problem to get an estimate.  

In my last property I used as an example, I purchased for $59k and turned in an $18k estimate for rehab. I put down 20% (about $12k), but they covered 100% of the repair. I left closing with a $4k check, which was the 18k-12k down- closing costs.

I opened up a no interest for 18 month credit card to pay for the rehab. I also have a HELOC and business credit card, but I didn't want to pay any more interest than I had to. When I refinanced, I paid off what I had on credit cards.

I don't know about refinancing before it rents I have never asked.  I like to have a renter first so I know exactly how much it will rent for and thus how much I can refi and still cash flow.    This one rented for more than I originally projected.  Another unit I have had for years, came vacant and rented for $50 less than I expected this year though $100 more than the prior tenants were paying. 

Hope this helps.