BRRRR stratagy, Refinance

9 Replies

Hi, I am looking into buying a rental using the BRRRR strategy using private money to finance the purchase and rehab cost . i am curious about the rehab part.

-How much LTV i can get back?

-How log after the rehab and appraisal are complete, will I be able to refinance?  

-how will my DTI and credit score effect the refinance?

-should I talk to a mortgage broker about the refinance before getting serious about a deal?

Casey Boerger

    - Only anticipate 65-70% LTV.

    - 6 to 12 months (from closing).

    - Probably a lot.

    - Yes.

    @Casey Boerger , good luck...

    Plan on 70% LTV at best.
    It’s not hard to find a lender that does not require seasoning. I begin the refinance process as soon as I begin rehabbing. As soon as tenants are placed we close the refinance.
    If you’re doing the loan in your personal name, of course DITI is part of the lender’s evaluation.

    Absolutely talk to a mortgage broker first and have them prequalify you. Don’t jump in without knowing for sure you can get the long term financing in place, or you might be forced to sell in less that ideal conditions.

    70 to 75% ltv and as far as the dti is concerned it would be calculated on a full doc loan but there are some stated income refi products out there at a slightly higher rate 

    I am currently doing this on a property in Kansas City. I built my portfolio with the BRRR strategy before I knew it was called that. Most of my loans are with a local bank but I want to lock my rate for the term of the loan with rates trending up. So right now there isn’t really seasoning even for a cash out refinance like I am doing... lending has loosened up finally. So my loan will be sold in the secondary market to a Bank of America or some other large bank. They will go to 75% LTV. So I bought the home cash for $73,000. I will have $15,000 in the rehab and it should appraise for $140,000. Solid deal. I anticipate rent will be $1100-1200 month. Just finished painting it yesterday so marketing for rent starts today.

    Brock Thomas

      Originally posted by @Brock Thomas :

      I am currently doing this on a property in Kansas City. I built my portfolio with the BRRR strategy before I knew it was called that. Most of my loans are with a local bank but I want to lock my rate for the term of the loan with rates trending up. So right now there isn't really seasoning even for a cash out refinance like I am doing... lending has loosened up finally. So my loan will be sold in the secondary market to a Bank of America or some other large bank. They will go to 75% LTV. So I bought the home cash for $73,000. I will have $15,000 in the rehab and it should appraise for $140,000. Solid deal. I anticipate rent will be $1100-1200 month. Just finished painting it yesterday so marketing for rent starts today.

       Solid numbers!

      I second @Brock Thomas .  I have a lender here in KC that works at the 75% mark.  Maybe the same one...

      We'll have to compare notes!!

      Matt Pritchard

        Also keep in mind down the road... If you switch over to commercial loans and purchase and refi through an LLC the numbers will be different as well. Once I switched to a commercial lender it was much easier to keep rolling using the BRRRR method. I also use a local bank here in KC.

        Nick McKinnis

          Originally posted by @Casey Boerger :

          Hi, I am looking into buying a rental using the BRRRR strategy using private money to finance the purchase and rehab cost . i am curious about the rehab part.

          -How much LTV i can get back?

          -How log after the rehab and appraisal are complete, will I be able to refinance?  

          -how will my DTI and credit score effect the refinance?

          -should I talk to a mortgage broker about the refinance before getting serious about a deal?

          -Generally you can get 75% of the appraised value on the refinance.

          -You can refinance at any time, but different banks have different "seasoning" requirements, i.e. when they'll refinance at appraised value instead of just the cash you have into the property. You'll need to ask them about this. 

          -If your credit is too low, banks won't generally lend to you, so you'll want to figure this out and improve your credit if need be.

          -I would start reaching out to banks early on to see if what they offer makes sense

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