Buy Rehab Rent Refinance Repeat

13 Replies

Do renter's have to be in the property paying rent for a minimum of one year to be eligible to refinance the property when using the "buy rehab rent refinance repeat (BRRRR)" method? Are there lenders that will refinance a property with the renters in it for only a month, or so?

@Adam Richards

I just did one after owning the SFR for four months and with a renter in it. Paid 135k cash and fixed it up for 25k...so 160k all in. It got appraised for 215k and my bank was willing to give me up to 150k cash with a cash out refi.

@Adam Richards some banks will require stabilization (12 months seems excessive). The Bank I work for, and another local bank down the street, will do the refinance as soon as the property is leased. I always assumed that was standard until one of my Borrowers told me about his past bank.

Most banks require 12 month seasoning. some require 6 months. . If you establish "a relationship" I always hated that term and it is overused I believe. but basically means if you prove yourself with several mortgages with the same lender, your lender will probably waive the seasoning requirement and refinance it as soon as a Tennent is placed to keep your continued business. 

I don't think they want to have a relationship with you, they want to make money. 

Shawn Coverdell

Homes in the Hood

Originally posted by @Adam Richards :

Do renter's have to be in the property paying rent for a minimum of one year to be eligible to refinance the property when using the "buy rehab rent refinance repeat (BRRRR)" method? Are there lenders that will refinance a property with the renters in it for only a month, or so?

Hi Adam,

No, you do not have to have the tenant in the unit for 1 year to be eligible to refinance. If you have a signed lease agreement including a cashed deposit check, most lenders will take 75% of the rental amount and use it as qualifying income. Even if you don't have a tenant in place YET, your lender can also order a "comparable rent schedule" (form 1007) for the appraiser to complete, in addition to the actual appraisal. The lender should be able to use 75% of the "market rent" as qualifying income as well. Hope this helps!

 

Originally posted by @Atta Bari :

@John Morgan Nice. Was that deal from Texas? I'd be surprised if there are any deals like this still exist in DFW.

Yes, it was in Grand Prairie. Wasn't the most perfect BRRRR but good enough. Collecting $1,675/month in rent off it. I did another one in Ft Worth last year. Paid 48k for it and dropped 50k into what turned out to be a major rehab, plus converted the garage into a master bedroom and bathroom. It's getting $1,400/month in rent now and worth about 150k. I may do a cash out refi on this one too since it's paid off. Well, sort of. I took 45k on a 401k loan to buy it and put the rehab on no interest credit cards for a year.

 

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Originally posted by @Erik E. :

@John Morgan
NICE! This is exactly what I plan to do with my 2 properties. Did you
receive a loan for the rehab 25k or it was cash as well?

I did a cash out refi on a paid off property for this one. I got 140k cash to play with after that refi and bought this one for 135k. So o basically got the house for free it seemed. Then I put 25k on no interest for a year credit cards. Got it fixed up and my bank said they would give me 150k cash after it appraised for 215k. So I bought another SFR for free. They're obviously not for free, but felt like it since I wasn't putting much $ into them. Just some rehab put on a credit card.


 

Originally posted by @Terry N. :

@John Morgan so you are $160 in but have a mortgage for $150k?

The property cash flows even after the refi note and expenses?

Thx. T

Yes I'm 160k in total and was only able to pull 150k out of it (70% of 215k appraised value). It wasn't the perfect BRRRR but the house still cash flows $100/month off a 15 year note in a really nice area with great appreciation. It was my first BRRRR and had to pay 10k out of pocket for the rehab. I'm ok with that because I snagged a great property in a great area with a cash offer I got from this cash out refi on the BRRRR property. Maybe I'll BRRRR this next one in the next year too...if my wife will let me lol

 

More often than not, I have seen 6 month seasoning requirements, but there are local banks/credit unions that can have more flexibility with that in my experience. There are also non-conventional lenders that will lend on a property as long as the debt service minimum requirement is met (I have seen 1:1 up to 1:1.25), as opposed to a full-doc conventional route. Many of them have more lax seasoning requirements but the rates are a good amount higher. 

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