Hey everyone my name is Ryan. I had a quick question regarding building an income property portfolio.
My grandparents passed away and their single family home is fully furnished and unoccupied. It's been sitting for a while so it definitely needs some love. The house is paid off so my mom and my aunt and myself own it out right. I want to use the BRRRR method to use our existing equity to roll in to new income properties to start building a portfolio.
Is this the best way to approach this situation? What should we look to do first to get the house to a place so it can be rented and reappraised? Any other suggestions would be amazing, thank you.
Maybe a home improvement loan or personal loan to get in up and running. Then do a cash out refinance to pull the equity out, pay back the loan and have funds for the next purchase. A cash out refinance requires an LTV of 75% for a SFR investment property.
The real estate is debt free and we have cash to make the improvements. So if the house is worth 250k now, we do 20k of improvements, rent it out and let’s say we get $1500 a month. We then get it appraised and let’s say it’s worth 300k now. We can then go to a bank and take out no more than 75%($225,000) to then go do other deals?
Exactly! I would just recommend paying off the debt that you accrued with the 20k in improvements.
@ryanmatthes, don't want to sound redundant but make sure you are still cash flowing after you cash out with your refi.
What Karina said. Property taxes + insurance will likely be around $4,750 (possibly higher) and your mortgage payment will add another $13,000 - $15,000 per year as you will not qualify for a owner occupant rate. With vacancy and capex reserves you will likely be deep under water.
I would advise renting the house out for $1500 per month for a while to test the waters (and pocket a nice little cash flow).