Conventional Loan or BRRR? Help!

1 Reply

Hello fellow BPers, I am currently under contract in a deal that I'm unsure what route to take - put 20% down and take a conventional mortgage or buy all cash and refi after a few months. Here is the situation: the property is a 2-family that is currently 100% occupied and rent-rolling in Plainfield, NJ. Both units have 2 bed/1 bath, with the upstairs unit having a "bonus" room. The purchase price is 160k. Repairs would be very light, cosmetic pretty much. Rent roll is currently $2150/month, which I think is still under-market rent for this area. The comps in this area are around 200-220k. That's why I think it might be better off taking the risk, purchasing all cash, and getting the 70% LTV at the ARV and getting all (or most) of my money out the deal. However, I am scared that if the ARV comes in at say 170k, only a little more than what I paid, I am going to be stuck with a lot of money in the deal, and a 3/4 point higher interest rate at the refi rather than conventional loan. Fellow BPers, what do you suggest I should do? I plan on keeping this deal long-term as it has good cash-flow either way and I want to keep in my portfolio. Thanks in advance!

If you're reasonably confident on the ARV and can afford to buy cash, do it. If you buy conventional up-front, you're still stuck with 20% down in the property long-term. So the only difference is a relatively meaningless 3/4 point interest rate bump? I'd rather take the shot at getting all the money back in 6 months.