BRRR

11 Replies

I just bought my first hold property September 9th.  On the first of November my new tenants will be moving in.  How long should I wait to do a cashout refinance.  I would like to get another property and start all over again.  

@Michael Rivera , it will depend on what the terms of your current loan are. Is there an early pre-payment penalty? Also what will your future bank (or current bank) let you do when you refinance? Listen to the latest podcast, there you'll see that the guest shopped around until he had a bank refinance what he wanted!

Originally posted by @Tim Shin :

@Michael Rivera , it will depend on what the terms of your current loan are. Is there an early pre-payment penalty? Also what will your future bank (or current bank) let you do when you refinance? Listen to the latest podcast, there you'll see that the guest shopped around until he had a bank refinance what he wanted!

 which podcast # are you referring to?

Originally posted by @Steve S. :
Originally posted by @Tim Shin:

@Michael Rivera , it will depend on what the terms of your current loan are. Is there an early pre-payment penalty? Also what will your future bank (or current bank) let you do when you refinance? Listen to the latest podcast, there you'll see that the guest shopped around until he had a bank refinance what he wanted!

 which podcast # are you referring to?

 Steve, my fault, I'm pretty sure it was episode 202with @Mark Walker https://www.biggerpockets.com/renewsblog/bp-podcast-202escaping-rat-race-rental-properties-mark-walker/

My BRRR strategy is as follows single family homes only ( I have 7 homes in metro PDX). Target purchase price at least 20% below market value (just scored one almost 30% below and close tomorrow). Down payment as low as possible 20-25% depending on lender (use others money when you can before your own). Will recoup at least 10% of my initial investment in 1 year with rent profits. Tenant credit score of 700 or better. Reno will not exceed 60 days and I do most of work (I'm a journeyman level trades guy). Pets OK (I have a dog) what's good for the landlord is good for the tenant $250 security per animal.. Refinance as soon as possible to extract minimum $50K clear per house. First, last, $1K and $250 per pet to move in. Hold open house and will rent in about and hour, advertise on Zillow, Craigslist and the like . $35 per adult credit check and qualified applicants bring financial info to open house. All rent checks to be postmarked by the 1st of month to my PO Box. $25 late charge per day. Raise rent annually 5%. Welcome to $250K+ per year.

Originally posted by @John Murray :

My BRRR strategy is as follows single family homes only ( I have 7 homes in metro PDX). Target purchase price at least 20% below market value (just scored one almost 30% below and close tomorrow). Down payment as low as possible 20-25% depending on lender (use others money when you can before your own). Will recoup at least 10% of my initial investment in 1 year with rent profits. Tenant credit score of 700 or better. Reno will not exceed 60 days and I do most of work (I'm a journeyman level trades guy). Pets OK (I have a dog) what's good for the landlord is good for the tenant $250 security per animal.. Refinance as soon as possible to extract minimum $50K clear per house. First, last, $1K and $250 per pet to move in. Hold open house and will rent in about and hour, advertise on Zillow, Craigslist and the like . $35 per adult credit check and qualified applicants bring financial info to open house. All rent checks to be postmarked by the 1st of month to my PO Box. $25 late charge per day. Raise rent annually 5%. Welcome to $250K+ per year.

@johnmurry when you refinance, does that typically cost you about $5,000 to get your money and the ARV cash out of the house? Is that something you just factor into your cost of doing business? Seems like a lot of money to pull your own money out, but knowing it's money you created through the investment and work you put into the rehab, maybe it's an acceptable cost of doing business.

THis is the part of BRRR I haven't been able to get a good handle on since no one can seem to give mean answer from their personal experience. What's your perspective?

When I take out a conventional loan on a $130,000 property give or take, my closing costs are $5,000-6,000. If I put work into it and it's now a $210,000 property and I want to refinance, I understand it would cost $5,000-$6,000 for me to get it refinanced and get my money and the new ARV value out.

Also, how long do you typically have to wait to do the refinance?  Can you do it immediately when you're done and it's reappraised?

Ever tried refinancing with quicken loans? 600 bucks. Easy as pie!

What about required title insurance?  Doesnt Quicken loans require it?  Scary if not.  

@Steve 

@Steve S.   It depends on the lender as to seasoning requirements before they'll let you refinance.  My bank doesn't have a seasoning period and their commercial lending dept doesn't differentiate between a first purchase or refinance in regards to interest rate, it's the same.  Which is awesome!!  Not a higher refi rate. 

In regards to your BRRR scenario, if the ARV is $210,000, youd be able to pull out up to 80% which is $168,000 when you refinance. Subtract from that your repairs, closing costs, and holding costs, and whatever spread there is between $130,000 and this other number is your profit. Hope I didn't miss anything. Good luck!!

@Michael Rivera

Welcome!  I'm not too far from you.  If you ever want to reach out with questions feel free.  We have 2 multifamily properties.  2 in 2 years, working on 3rd.  Best of luck!!

Originally posted by @John Murray :

Tenant credit score of 700 or better....  First, last, $1K and $250 per pet to move in. 

This definitely doesn't translate to other areas. Most of mine are 600 or better. People 700 or better will be buying.  That's also a lot of money down to move in. 

Originally posted by @Steve S. :
Originally posted by @John Murray:

My BRRR strategy is as follows single family homes only ( I have 7 homes in metro PDX). Target purchase price at least 20% below market value (just scored one almost 30% below and close tomorrow). Down payment as low as possible 20-25% depending on lender (use others money when you can before your own). Will recoup at least 10% of my initial investment in 1 year with rent profits. Tenant credit score of 700 or better. Reno will not exceed 60 days and I do most of work (I'm a journeyman level trades guy). Pets OK (I have a dog) what's good for the landlord is good for the tenant $250 security per animal.. Refinance as soon as possible to extract minimum $50K clear per house. First, last, $1K and $250 per pet to move in. Hold open house and will rent in about and hour, advertise on Zillow, Craigslist and the like . $35 per adult credit check and qualified applicants bring financial info to open house. All rent checks to be postmarked by the 1st of month to my PO Box. $25 late charge per day. Raise rent annually 5%. Welcome to $250K+ per year.

@johnmurry when you refinance, does that typically cost you about $5,000 to get your money and the ARV cash out of the house? Is that something you just factor into your cost of doing business? Seems like a lot of money to pull your own money out, but knowing it's money you created through the investment and work you put into the rehab, maybe it's an acceptable cost of doing business.

THis is the part of BRRR I haven't been able to get a good handle on since no one can seem to give mean answer from their personal experience. What's your perspective?

When I take out a conventional loan on a $130,000 property give or take, my closing costs are $5,000-6,000. If I put work into it and it's now a $210,000 property and I want to refinance, I understand it would cost $5,000-$6,000 for me to get it refinanced and get my money and the new ARV value out.

Also, how long do you typically have to wait to do the refinance?  Can you do it immediately when you're done and it's reappraised?

You'll most likely have to pay closing costs. Some are cheaper for refinances but 5k is a good number to on. 

Some banks do 6 months seasoning but it's common for them to wait 1 year. I've only seen a few that you could do right away. 

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