How do I BRRRR a all cash deal?
It would be a dream come true to be able to BRRRR my first deal. I have a cash deal with a duplex in process 50k purchase 20k rehab. With in 20 mile I have purchased 2 other duplex's for 175k and 195k both Bank conventional loan. If I purchase this one with my own cash or use private money.
How do I BRRRR this deal???
The key is to finding the after repair value and keeping your total expenses to 70 %. After stabilizing the property with tenants you then go to the bank and refinance. At that point depending on the lender you can pull out upward of 60%to 80% of the value.
Example: you 50k duplex after putting 20k into it is worth 100k you can refinance after stabilizing it and get your 70k back to reinvest..
So if you buy with a conventional loan you are leveraging your out of pocket and the arv ( after repair value) still has to be 60%to 70% after all repairs.
The 175k and 195k properties depends on the amount of money you are spending to repair and the comparable prices in the area.
@Jacob Martinez As has been mentioned by @Alix Cassagnol, to complete the "perfect" BRRRR, you need to get your all in price, including the purchase price and all repairs, around 70%-75% of the after repair value as appraised by the lender.
Buying the property with cash makes no difference on a BRRRR. It does put you in a stronger position by offering all cash, however. So you MAY be able to bring the offer price down a little with your cash offer and you can also think about offering a quicker close. This is a method I've used a few times to get properties at a lower price.
Another advantage with buying all cash is the ability to pull out your cash sooner than the 6 month seasoning period many lenders want to see on a financed property. There are some caveats to it, however, and needs a much longer discussion outside of the scope of this topic.
Have a great day!
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#4 Multi-Family and Apartment Investing Contributor
- Cincinnati, OH
@Jacob Martinez, agree, cash is of no factor in BRRRR and has many advantages. I do want to clear up that depending on your needs, you will still be subject to seasoning. If you invest 70k, you will only be able to refi based on that cost within the first 6-12 months (depending on bank seasoning). To get your refi based on new appraisal, you will have to wait for seasoning period to pass.
Third option: if you have a relationship with lender, all bets are off and you might be able to refi based on appraisal before seasoning period is over.
Thank You guys for all the great information. Now to take some action!