Brrrr Strategy (Questions)

5 Replies

Hello BP Family. I am nearing the end of the brrrr book I have a few questions. I am getting a little confused about the brrrr strategy.I previously thought that with the brrrr strategy I would have to purchase the property Using my own cash or a hard money lender then rehab it and then refinance To pull out the loan to value that the bank will give me and then repeat the process. I'm reading the book and it says you can use the strategy if you get a loan on the property as well Like a conventional loan or an FHA loan if you house hack. How is this possible? I may be wrong. I had multi family properties in mind between 1 to 4 units. That is why I am getting a little confused. Do I need to use my own cash or a hard money lender to finance the whole cost of the multi family property?

Any help or insight would be great.

@Aaron Thompson - the source of the cash is not relevant, it's the big picture that matters. If you buy a home with hard money for $100k and put $20k into it and it's worth $170k, you want to refinance it with a lower rate loan to pay back the HML and to get your money back. Then you have a home that's worth $170k, a loan on it for $120k and a renter paying your mortgage.

Consider the exact same scenario but replace "hard money" with FHA loan. Does anything change?

You're still going to refinance to 1) get your money back and 2) likely go conventional so you don't have to pay MI (or MIP in the case of FHA). The BRRRR aspect stays the same.

Hey guys, I'm excited to admit this is my first response on BP! I've joined recently as well and have been looking into the BRRRR strategy for a little while now trying to make sure i understand it 100%. Tchaka Owen has it right, and with that same example he gave you the other reason to refinance with the bank other then the lower interest rate/to payback the HML is to be able to get that 50K of equity out of the property rather then leaving it in. Either way you will have that 50K, but when you refinance with the bank and payback yourself as well as the HML, you can then go repeat the process more quickly. I believe I'm saying this correctly so please let me know if I'm wrong here.

@Aaron Thompson

There is also the option of a renovation loan for the initial purchase if you don’t have cash on hand and the property does qualify for traditional conventional financing.

 Thank you Jerry I did not know about a renovation loan. I’m looking to get into real estate investing and I have been doing research I want to put this strategy in place but I don’t have the Initial capital at the moment which is what I’m working on.