If you have clicked on this post, you have possibly experienced some of the confusion I have and maybe worked through it or had a coach.
First alittle back story.
I'm 28 years old investor in Georgia currently looking for single family or multi family homes rentals. I have been a member of Bigger Pockets for 2 months but I have been researching the benefits and possibly of realestate for 7 months. I have read books, watched webinars, and read articles but I am still puzzled on the BRRR method. To date, I've worked on my credit to get an average score of 710 and saved 10k in a bank for investments.
Bigger Pockets has a wealth of hard and private lenders in Atlanta and middle Georgia where I could get a decent rated loan to buy houses between $35-$100kin my area. After scouting a deal, working the numbers to get the loan, fixing the property,and refinancing, how do I get the money to pay the private lenders back?
Most of the information I've found from different sources doesn't clearly illustrate how to take a refinanced mortgage to pay a private lenders.
Can someone give me some insight on this?
After you refinance, you'll get a check and whatever difference you have from the ARV and debt obligation you have will be used to pay off the investor.
@Arriston Worthy once you have fixed the property up, you will need refi. Most companies will give you 75% LTV on a refi and some require seasoning. Example - you find a property that would be worth $100k once fixed. You purchase for $30k, rehab costs $25k. When you close the refi, you will receive $75k minus fees, origination and closing costs, let's call it $5k.
100,000 x .75 = 75,000 - 30,000 - 25,000 - 5,000 = 15,000.
$15,000 would be your cash out in this example. Be careful not to eat up all of your equity.
Like David said above, the lender will finance your asset based on the improved value. Find a lender in Atlanta or wherever you are looking that has worked with similar deals. BP should be able to help. Make sure your math works to be able to cash out enough to fully repay the HML based on the ARV. If you have a home that is worth $100K after improvements and the lender will only go up to 85%, you'll get an $85K loan. If your HML is below that amount, you should be able to repay it no problem. It's all in the upfront numbers and finding a lender and knowing what their terms would be on the back end.
Rush was a bit more detailed than I was haha
Just check the post. These answers are awesome. Now I just have to work on a revampingy LLC so I can get a business line of credit
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