BRRRR with no income for refi.

20 Replies

Hey guys! It's HAPPENING! I found a deal and I have a hard money lender ready to go. All we have to do is pull the trigger. BUT with the current state of things, there are a few hiccups that worry me. The property in question is an as-is Triplex. We're expecting to do some major renovations, so we will have to evict the tenants as the units will not be livable while we're doing that. This is supposedly an exception to the CV19 eviction moratorium anyway so I'm not TOO worried about that detail. The one I am worried about most is the cash-out refinance. The only way to get a refinance is if you're making money, right? So you HAVE to be making enough money from the units being rented out to count as sufficient income for the bank to refinance, right? I don't know why, but I feel like getting a refi is going to be a pain in the ***. Other than the rental income, we will not have anything else. Will the rental income be sufficient? if the BP calculator isn't lying, we should be pulling in ~$3,600 total and then expect to have a mortgage payment of $1200-$1700, depending on what the final accepted offer is.

Does anyone have experience with trying to get their first BRRRR deal refinanced? Any help or advice in this regard would be appreciated.

@Tashina Taylor

You have no other income? That might be tough. Don't forget the lender only considers 75% of the rental income. So that $3600/month is really $2700. Now subtract your mortgage payments, insurance, and taxes. What's left over is your income. A percentage of that (say 40%) is what's left to service your debt.

Talk to whoever you are going to refi with be it the hml or somebody else. Have them run the numbers to see what they will be able to lend you

@Tashina Taylor

Well, it will play into how much loan you can get. Investment loans require 20% down and you get an interest rate break at 25%. But, you still need to show that you can pay back the loan. That why you need to show sufficient income to service the debt (principal, interest, taxes, insurance).

If you want to chat about this, feel free to direct message me and we can setup something up.

@Tashina Taylor you should flip the house; there are lenders out there that offer collateral cash flow loans (CashCall) but those loan terms are expensive. Flip the house and move on - if you have a good BRRR, you'll be able to flip it.

@Moises R Cosme Aren't multi-family homes notoriously hard to sell? I'd be afraid of getting stuck qhen the whole payment comes due in a year.

I had considered selling them as apartments or townhouses individually as that would make them more affordable for someone to buy and live in, but I don't know the logistics of that.

@Tashina Taylor

Have you spoken with a banker yet about a refi? I can tell you that not many banks are doing cash out refis at the moment. CIVIL/shutdown related. I suggest you talk with a banker about your plans. Some banks require 1 and even 2 years of income before they will consider your rental income. Be careful your HML may scoop that property from you if you can't make good on the lone terms. Tread lightly do your due diligence. Good luck.

@Tashina Taylor    multis are easy to sell in my markets, but they look like they sit for a bit in Gillette.  As a general rule, I don't do a deal that does not offer me multiple ways to cash out.  If you are concerned about your ability to flip it and make money, there is something wrong.    I took a quick look at Gillette on Zillow, there are good number of multi families - which means that you can get feedback from local agents on average days to offer etc.  Drill down on the numbers & gather as much market info as you can... A refi is not going to work, you need another way to get your money out.  

I hope this helps & I am sorry if my response comes across as negative - I do not intend it to be that way. 

Originally posted by @David M. :

@Tashina Taylor

You have no other income? That might be tough. Don’t forget the lender only considers 75% of the rental income. So that $3600/month is really $2700. Now subtract your mortgage payments, insurance, and taxes. What’s left over is your income. A percentage of that (say 40%) is what’s left to service your debt.

Could you elaborate on the logic of this a bit?  It seems weird to say that the amount left over after your mortgage payment is the amount left to "service your debt".  Isn't the mortgage payment that was just subtracted the amount that services the debt?  It seems like double counting to phrase it that way.


@Brandon Scott

Good catch. I went too fast.  This is a refi so the existing payment wouldn’t be counted.  (I’m using the app so I can’t read the post and write a response at the same time). Thanks

@Moises R Cosme The house is not in Gillette. It's in Oregon on the coast. We ended up getting in touch with the bank we were trying to get a conventional loan through and they said we will not have an issue with a refi as long we were getting more than $2000/month from the place. Hooray!

@Tashina Taylor ensure you are cash flowing on it.... sounds like the numbers will come really close with this being your only income i would start with fix/flips to keep your capitol coming back in... wat happens if the fridge goes ouT Right after refi and u have no money to replace?

@Moises R Cosme Thank you! I will be sure to! I'm going to post the details from the BP calculator as soon as a deal is closed. I'm eager to see the real life differences between our estimate and what really happens!