Use my Primary Residence to finance my first BRRRR?

Question

Hello,

I am a new investor and am figuring out what real estate niche I am wanting to do and BRRRR looks like to be the one that will work best for me.

With that being said I am looking to buy my first primary residence property (SFH) and I am wondering is it a good idea to use this property to refinance and use that financing and use to start my BRRRR investing? I will most likely using a conventional loan with 20% down if not more for my home. But please help me understand what are the pros and cons of using my own primary residence to refinance and use the money from my refinancing to start buying BRRRR properties.

Thanks,

Heath

Jay Hinrichs · Answer

get qualified for your take out on the refi before you get over your ski tips..

risk is a retrench in values and your heloc gets frozen or called..  you now have NO real equity in a non appreciating rental. with no way to pay the heloc off.

read the fine print of helocs  they are not fixed term loans.. they can be frozen and called at the discretion of the lender.

I like it for flipping.. or if your darn sure you can retire it with a refi on a rental.

but keep in mind many people try this BRRR only to find out they cant get all their money back on the refi now your stuck with loan on your house and a rental and probably next to nothing in real cash flow since you have a first and a second..

those are the down sides everyone else will talk about the upside but just protect your primary..

Alvin Uy · Answer

@Heath Cejka

This is exactly how i got started.  That said, Its going to be a while before you can take out any money from your primary.... but depends where you invest in.   Luckily for you, you’re in an area that appreciates.  If your first loan has a good 30yr fixed rate that you dont want to touch, Heloc is a great route.  May not be the fastest route but it can definitely work.

This has been my strategy and I have slowly bought 5 properties this way in Los Angeles.   In fact, Ive recently gained access to about $1M in Heloc at an average rate of 5.6% just from 2 of my properties.... using the funds from the Heloc as downpayment for a 7th one.  Unfortunately, Its a JV project conversion of SFR into a Triplex so its not a keeper.   But my partner and I will be flipping this one with a big potential net profit..   I will then put that as a downpayment towards a another multi unit conversion project I will be doing on my own as a buy hold property in Los Angeles.  Planning on repeating this flip then hold process.

Jake S. · Answer

@Heath Cejka I actually use a HELOC against my house to go after rental deals. As long as you properly analyze it, I see no issues!Send me a message quick, would like to discuss something that would help you tremendously here

Heath Cejka · Answer

@Jake Stuttgen ok great. What would you say the downside to using your own residence to finance BRRRR deals are besides I’m not getting rent out of it?

Jake S. · Answer

@Heath Cejka I'd say somewhere between 35-50% equity before you either refinance or get a HELOC

Heath Cejka · Answer

@Jake Stuttgen so would it make more sense to get 50% of equity before i refinance then move forward?

Jake S. · Answer

Hey @Heath Cejka, if you only put 20% down on your primary residence, you won't be able to refinance it or get a HELOC against it to do BRRRR, as youll be required to maintain at least 20% equity in your property

Use my Primary Residence to finance my first BRRRR?

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