Refinance and BRRR Strategy

3 Replies

I'm looking at buying a property. $130,000 2bed 2bath condo. Expecting rehab cost to be about $25-$30K. ARV should be around $200K. How long after I rehab the place can I refinance and get a new loan? I'm thinking of doing the rehab, renting the unit out, refinancing and pulling my investment out. IS this possible? Thanks

@Ovais Zuberi , can you also give us the realistic rental return per month? Once you include HOA costs, condos often/usually don't show a positive cash flow, once fully leveraged.

Have you already found a Lender who will loan you 80% ARV for an investment condo?

Around BP, the usual thought is to only be into it for 70% of its value, not 80%!

Can you see that the margin is very tight? Things do go wrong with Rehab estimates!

And ARV estimates. And Rent estimates. And expenses estimates. And Interest Rate...

But other than those things, you could be good to go?...

Brent,

Thanks for the input.

Rents in the neighborhood go for $1500-$1700 depending on how the upgraded the unit is. After doing the calculations, keeping in mind hoa, taxes, vacancy, other expenses I’m looking to cash flow $300-$500 a month not being fully leveraged.

Can someone explain the process of being fully leveraged? I have not done this before and I have not found a lender to refinance once the repairs are complete.

Will the lender only refinance 70% - 80% of the ARV?

@Ovais Zuberi , so it looks like you'd be into it for about the "1% Rule" mark. Whereas, people paying $200k would expect to gross less than 1% return per month for their outlay?

ie. Check that $200k ARV is realistic - in today's market! (Any sold comps of $200k?)

The process of "refinancing and pulling my investment out" is the same as being "fully leveraged". ie. You're borrowing the maximum that Lenders will allow.

Your goal of course is to have none of your own money left in the deal at that point.

Which is why, if you've paid about 80% of its value in the first place (instead of 70%), I mentioned that your margin is very tight! A bit too close to the bone? Not enough meat? Too skinny?...

["Will the lender only refinance 70% - 80% of the ARV?" Yes! Ask around.]

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