BRRR strategy questions

[Julio R Gonzalez]

Hi BP, I am new to REI and I am building knowledge on all strategies (pros and cons) to determine which one is best for my current situation. This is specific to the BRRR strategy.

Say I find a multi family property that I want to fix to then rent (BRRR).
- I take a hard money loan ($100k) to cover the purchase of the property and repairs cost (don’t worry about the loan details)

- I rehab the property and it's up to market say $200K (ARV).

- Say the hard money loan was for 8months and by month 6 I have all ready (fixed)

- Now is time to refinance the property (for a longer, lower payment)...

1. Do I need to put 20% down for the loan or will the equity of the home help there?  

2. Will the loan be for the appraisal value (assuming the appraisal was for $200K) or is it for a portion of that (50%)?

3. Does the conventional lender have all the requirements they do for a conventional loan (like having enough assets, having a low debt to income ratio, good credit....)?

4. How will having a $100k loan with high interest affect your opportunity to refi?

These are the first few questions I have for now. The main purpose of this post trend is to understand the BRRR strategy and determine if it works for me (and a secondary purpose is to have other newbies learn)

Thanks 

JR Gonzalez

ME

Keywords: hardmoney, newbie, Texas, BRRR, conventional, Multifamily

[Guifre Mora]

Originally posted by @Julio R Gonzalez:

Hi BP, I am new to REI and I am building knowledge on all strategies (pros and cons) to determine which one is best for my current situation. This is specific to the BRRR strategy.

Say I find a multi family property that I want to fix to then rent (BRRR).
- I take a hard money loan ($100k) to cover the purchase of the property and repairs cost (don’t worry about the loan details)

- I rehab the property and it's up to market say $200K (ARV).

- Say the hard money loan was for 8months and by month 6 I have all ready (fixed)

- Now is time to refinance the property (for a longer, lower payment)...

1. Do I need to put 20% down for the loan or will the equity of the home help there?  

2. Will the loan be for the appraisal value (assuming the appraisal was for $200K) or is it for a portion of that (50%)?

3. Does the conventional lender have all the requirements they do for a conventional loan (like having enough assets, having a low debt to income ratio, good credit....)?

4. How will having a $100k loan with high interest affect your opportunity to refi?

These are the first few questions I have for now. The main purpose of this post trend is to understand the BRRR strategy and determine if it works for me (and a secondary purpose is to have other newbies learn)

Thanks 

JR Gonzalez

ME

Keywords: hardmoney, newbie, Texas, BRRR, conventional, Multifamily

1. NO, your equity is your skin on the game. 

2. YES if you are doing a cash-out refi. If not you just need to take out the 100K loan to an R/T 30 year.

3. Yes, you still need to qualify with a conventional lender, but they can offer better rates. Now there are asset-based lenders ("Commercial lenders/ Investor Lenders") That will take the DSCR to qualify the loan. Good credit will get you better rates and terms. Property need to be leased.

4. No, the new lenders are qualifying the asset not how you acquired it. Completely normal to take out a high-interest lender and "Refinance" to better rates and terms.