Hey BP! I’m wondering how exactly the brrrr strategy works & I really need you’ll help!

I bought my 2nd rental property (sf)cash from the auction(again) and again used my own cash for the renovation and they both rent out now for 700 month. I dumped around 15k into both properties and both their arv is 60k.

My question is how do I cash out refinance without the constant hits on my credit and how soon can I cash out refinance ? You’ll help would be much appreciated bc it seems like the answers to those questions always seem to be cloudy.

@Raheem Johnson you cant avoid the inquiry hits on your credit. They are small and will recover.

For conventional refinancing, you'll need to wait a minimum of 6 months. There are lenders that will do shorter, or zero, seasoning, but they are generally more expensive loans.

Yeah Raheem , you will take a small hit on your credit report, But it's small. Just talk to your Bank and explain exactly what you want to do. My experience has been great, I have 4 Sfr and did the BRRRR on the 1st two. My bank did require 6 months Seasoning in the loan @ 5.5 % . As far as money out of pocket, I'm usually including that rehab $ in my loan as long as it's not too much. My properties are appraising for 25-30% or more than I'm buying them for so It's working pretty well. Hope this helps.

Jay 

@Jason D.

Thanks Jason as far as seasoning the banks just want to see that the tenant has bring paying for 6 months is that what you mean ?

@Jay B.

Thanks Jay when you say you’re including the rehab in the loan what type of loan is that if you don’t mind me asking ?

I’m doing mine with the commercial side, Not the conventional mortgage side. They are a little more flexible. And I can include the cost of rehabs into my loan. So if it’s a 50K house w 5k Rehab, as long as it appraises for more they will finance 55k  with 15% Down. 

Seasoning is a time period of how long you have be paying on the loan before they will let you make changes to it . 

I’m doing mine with the commercial side, Not the conventional mortgage side. They are a little more flexible. And I can include the cost of rehabs into my loan. So if it’s a 50K house w 5k Rehab, as long as it appraises for more they will finance 55k  with 15% Down.  

Ck with your local federal credit unions there the easiest work with.  Something to keep in mind is that we are in late stages of the cycle, so you may only want to borrow 70 percent of ltv.   This will you leave a bigger cushion and better cash flow.

I don't have to season any of my properties.  There are banks that don't require it.

@Raheem Johnson seasoning is time of ownership. For conventional loans, fannie mae requires a minimum 6 months ownership before you can refinance a property.

Like @Gareth Fisher says, there are banks that do not require seasoning, but the are not conventional loans, and generally have a combination of higher interest, higher closing costs, and shorter amortization.

The credit hit is not a big deal in the scheme of things and will recover quickly.  Seasoning is needed for cash out on Fannie Mae loans and is 6 months.  

If you are in a rush to get money out for whatever reason there are lenders as a couple people have said that will allow this.  Rate will be higher and maybe shorter term but still a 30 year amortization usually.  Also it is still conventional just not Fannie or Freddie.  

If your main concern is the credit hit I would not worry about it too much as it takes 3-4 months at most to recover.  

@Gareth Fisher Why late in the cycle should you only pull 70 percent out instead of a higher percentage like 80 percent? Maybe i miss understand what you mean by this.

@Jay B.

Thanks so much Jay you really answered a lot of my questions and you’ve been so helpful man!

One last question, if you're on the commercial side this means you have your properties under an LLC right and what are those general requirements?

@Gareth Fisher

Really Gareth didn’t realize credit unions would be easier to work with wow! Awesome advice my man thanks so much!

@Jason D.

Thanks again Jason I know my questions can seem like beginner questions but man you don’t know how much I appreciate any and all of your advice !

Originally posted by @Shane C. Downs :

@Gareth Fisher Why late in the cycle should you only pull 70 percent out instead of a higher percentage like 80 percent? Maybe i miss understand what you mean by this.

Because this will put you in a more defensive position.  You will have a higher income and more equity, with less debt.   50-60 is ideal imo.    Unless they are non recourse loans, then by all means borrow away.

@Garrett Fisher That makes sense thank you for clearing that up. Im currently doing a house hack and trying not to aim at leveraging even though its tempting