BRRR Hang Up

[Account Closed]

I love the idea of BRRR. But timing doesn't make sense to me. I get that you buy, rehab, rent, refinance, and repeat, but can someone set the average timeline for me simply? So...what bank/regulations allow for any of this to happen in under 6 months? I had a realtor tell me years ago you can't even do a new appraisal until you hit 6 months (I had a home I sold that someone offered my list price at, then the appraisal came in 6k under listing, so they couldn't get financing from a bank, and the realtor told me you couldn't resubmit once the appraisal was done without going through submitting that the appraisal was inaccurate.)

Does anyone have a government reference on how long you have to wait before you get a reappraisal? Is it different per bank, or is it a state-monitored reporting thing appraisers have to do?

My bottom line is, if I want to buy a home for 200k, it appraises for 200k at closing, BRRR it, and in 3 months of work I think it's worth 250k, but the appraisal process won't allow me to do so until 6 months (and the bank won't even consider a new value until we have a year's worth of new rent), how can I possibly do 25-50 rentals in the first year??). I very much want to roll the BRRR method, but it doesn't make sense. Can someone explain this?

[Patsy Waldron]

Well.... Unless you have several rehabs going at once, you won't/can't have 25-50 rentals in a year using BRRRR. This is not a scale-up-quick method, for sure.

Most banks (what my own bank says + from what I have read of other people's experience) require you to wait 6 months ("seasoning") before they will refinance. However, if you use the "delayed financing exception," you can cash out as soon as rehab is over. If you do everything cash upfront, your bank may also allow you to refinance sooner than that. If you want to include the rents in your income to qualify for new loans, you'll just have to wait until they show up on your taxes.

Also- just to be clear, right from the get-go the house should appraise for more than what you bought it for. And it doesn't matter what YOU think the house should reappraise at after rehab. You should do some research before you even buy about what similar properties are selling for so you know what you expect your rehabbed property will appraise for, and budget your rehab to hit 70% of that value. It's all in the math.