Sell Rental, Use Cash to BRRRR? | Advice Request

Starting Out
5yFollow

Sell Rental, Use Cash to BRRRR? | Advice Request

Casey B Silveria
Boise, ID · Member since 2020 · 9 posts · 3 votes

Hello BP community! I am a newer investor and strongly thinking about selling my rental and using the cash proceeds (net ~$170k) to begin BRRRR'ing in the Midwest. The rental is an appreciating market (Boise) but I think now is a good time to cash out (no taxes due to primary residence, 2/5 years). Does this sound like a good strategy? What should I be thinking about as negatives/consequences to this plan? 

I appreciate any and all input! 

Casey

1Reply
20 views

Most Popular Reply

Jack BeVier
Professional · Baltimore, MD · Member since 2011 · 37 posts · 52 votes
5y

Personal DTI used to be the the constraint to rental portfolio growth. We've been slogging away since 2002 and are up to 762 rental properties. That said, in the past few months the DSCR loans are now at rates that are more competitive than banks. 4 handle interest rate (down to 3.75% with buydown), 75% LTV cash out, 30yr fixed rate, 30 yr term. Those terms make it exciting to be growing a rental portfolio. With inflation on the horizon, I think that hard assets and long-term fixed rate debt are the places to be. My 2 cents.

3Reply
See this reply in the discussion

5 Replies

Jump to latestLatest
  • Jim K.
    Rental Property Investor · Charlotte, NC · Member since 2017 · 271 posts · 259 votes
    5y

    Having lived there for 2/5 years, you're in a good spot to carry out your strategy. It's a personal choice, but I'd do the same thing if I was in your shoes.

    Another option to consider is doing a cash-out refinance, keep it as a rental, and use those proceeds to BRRRR with. If you're DSCR is >1.25, you'll be in a better spot than if you sold it from a lender's view as they look at DTI heavily.

    2Reply
  • Brandon VukelichBusiness Member
    Real Estate Broker · Tacoma, WA: 🏢 27 LTRs 🏡 3 STRs · Member since 2018 · 546 posts · 456 votes
    5y

    I'm in the same situation with a small rental in Tacoma. I don't like SFR as rentals, which is why we're not doing a cash out refi on it. It was a flip opportunity that we decided to BRRRR instead and hold for two years. I'm all about more doors under one roof. We're selling this summer and using funds to purchase another MF for buy and hold. At least a 4plex but may use to syndicate on a larger deal. So I would suggest scaling your portfolio, which could involve BRRRR'ing a duplex or larger too. I suppose negative consequences could be another covid or something and banks tighten up and you can't refi your BRRRR. You also have to assume prices will continue to rise to refi. Good luck in any route. No right or wrong answer really. I'm just a bit biased towards traditional buy and hold apts. Thankfully we all don't want to do the same thing, it's already competitive enough out there.

    Broker at Multifamily Properties519 Reviews
    WebsiteView Page
    2Reply
  • Jack BeVier
    Professional · Baltimore, MD · Member since 2011 · 37 posts · 52 votes
    5y

    Personal DTI used to be the the constraint to rental portfolio growth. We've been slogging away since 2002 and are up to 762 rental properties. That said, in the past few months the DSCR loans are now at rates that are more competitive than banks. 4 handle interest rate (down to 3.75% with buydown), 75% LTV cash out, 30yr fixed rate, 30 yr term. Those terms make it exciting to be growing a rental portfolio. With inflation on the horizon, I think that hard assets and long-term fixed rate debt are the places to be. My 2 cents.

    3Reply
  • Casey B Silveria
    OP
    Boise, ID · Member since 2020 · 9 posts · 3 votes
    5y

    Thank you for everyone's input! 

    1Reply
  • Jim Paulson
    Boise, ID · Member since 2014 · 121 posts · 73 votes
    5y

    @Casey B Silveria now is a great time to be a seller in Boise! I am a Realtor and owner/broker of a small independent real estate company. I just listed a SFR that I sold originally to one of my investors for $449,900. Like most properties in the Boise area, we got into a bidding war and the property sold for $490k cash!

    I am planning on moving into my rentals before selling them so that I can convert them back into owner occupied to take advantage of the 2/5 rule.

    Best of luck.  Feel free to reach out with any questions.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free