Finance now or later?

7 Replies

Hi everyone, 

I am continuing to try and apply BRRRR principles and could use some insight on a deal I have under contract.

Deal specifics:

Single family home, contract price 120k, currently valued as is 170k(seller wants out), if light repairs (about 10k) ARV 185-190k. Rental price 1500-1600/mo.

My questions are:

Would you acquire with cash for 120k, repair, then refinance(and pull out 75% of 185 ARV) and hold as a rental.

OR

Finance at 4.875%, 30 year fixed to acquire the property at 120k with 20% down(24k), repair(10k) and rent with the fixed financing in place. (leave 34k in the deal and refinance at a later date)

Just finished reading @David Greene 's book, and learning about the velocity of money concept of using cash and refinancing and using for the next deal. But with the current price of this home under contract, it already is going to be acquired under market value without  having to use a cash offer. I see some advantage in making a 20% down payment at the 120k price, and keeping the cash/credit I have on hand to acquire the next deal and BRRRRing that one. I figure that with reserving the purchasing power for the next deal, the cash on hand will allow me to obtain the next one sooner rather than waiting until I can refinance out of the one I currently have under contract. What would you do? 

Any thoughts would be greatly appreciated!

Thanks!

@Patrick Ng I agree with @Rothy Soun - it depends on how bad you need the cash now. 

Are you looking to do a lot of deals or just want to buy ~1/yr? I used BRRRR to get started to buy more but have also put 20% down for better financing terms, etc.

It looks like you've done your homework. Can you really go wrong on the deal? 

Don't get stuck in analysis paralysis!

Best of luck!

Originally posted by @Patrick Ng :

Hi everyone, 

I am continuing to try and apply BRRRR principles and could use some insight on a deal I have under contract.

Deal specifics:

Single family home, contract price 120k, currently valued as is 170k(seller wants out), if light repairs (about 10k) ARV 185-190k. Rental price 1500-1600/mo.

My questions are:

Would you acquire with cash for 120k, repair, then refinance(and pull out 75% of 185 ARV) and hold as a rental.

OR

Finance at 4.875%, 30 year fixed to acquire the property at 120k with 20% down(24k), repair(10k) and rent with the fixed financing in place. (leave 34k in the deal and refinance at a later date)

Just finished reading @David Greene 's book, and learning about the velocity of money concept of using cash and refinancing and using for the next deal. But with the current price of this home under contract, it already is going to be acquired under market value without  having to use a cash offer. I see some advantage in making a 20% down payment at the 120k price, and keeping the cash/credit I have on hand to acquire the next deal and BRRRRing that one. I figure that with reserving the purchasing power for the next deal, the cash on hand will allow me to obtain the next one sooner rather than waiting until I can refinance out of the one I currently have under contract. What would you do? 

Any thoughts would be greatly appreciated!

Thanks!

Cash is king.  Hold onto your cash and use other people's money to scale your business. 

@Rothy Soun

@Cameron Tope

@Stephanie P.

Thanks for the replies! I anticipate keeping the cash now would allow me to make a stronger, cash offer in the next deal sooner rather than having to wait to refinance out of this current one if close on it cash. 

I just am thinking in the longer run, that if I finance after I repair this one that I’ll be able to pull more out and have a larger position to offer on the next one, and perhaps get a bigger deal.

Trying to weigh if that would be more advantageous, or if being able to move faster on a similar deal at the same price but sooner would be more advantageous. 

Thanks for all your input! 

Patrick

Originally posted by @Patrick Ng :

@Rothy Soun

@Cameron Tope

@Stephanie P.

Thanks for the replies! I anticipate keeping the cash now would allow me to make a stronger, cash offer in the next deal sooner rather than having to wait to refinance out of this current one if close on it cash. 

I just am thinking in the longer run, that if I finance after I repair this one that I’ll be able to pull more out and have a larger position to offer on the next one, and perhaps get a bigger deal.

Trying to weigh if that would be more advantageous, or if being able to move faster on a similar deal at the same price but sooner would be more advantageous. 

Thanks for all your input! 

Patrick

If it was me, I would refinance to get more cash to put into the next deal.