How the Heck Are You Doing 5-10 BRRRRs Per Year?!

70 Replies

BRRRR works, no doubt. I've completed two but am now stuck waiting three months until I can cash-out refi on my third. So here's my question-- how the heck are all these investors doing it-- BRRRR-ing 5-10 properties per year?!

Since Fannie Mae's seasoning requirement is six-months for a cash-out refi, these investors would need a LOT of capital to continue to acquire properties while they wait for refi funds. For investors like me, who only have the capital to purchase + reno one property at a time, that limits me to two BRRRRs per year (if I do it perfectly). I'm currently looking for additional funding at local banks and credit unions, but with so much money tied up in the current BRRRR, my DTI ratio and credit score have taken a real hit.

SOOOO-- Brilliant investors out there in BP Land-- how are you doing it-- funding multiple BRRRRs simultaneously?! Are you relying on partnerships or, if you're a solo investor like me, how have you built-up your property acquisition fund? Are you using some combination of hard money / HELOCs / PLOCs / credit cards / family & friends / partnerships / flip profits?

Many thanks in advance!

Mark...

One method is to not use only Fannie Mae loans. All of our loans are portfolio loans from community banks. Usually the amortization is shorter (at least in the Midwest). Ours are generally 20 years, but we have no problem getting quick cash out refinances. 

@Andrew Syrios -- I've looked into that briefly, but as you noted, the amortization is shorter which would make the monthly payment higher and cut into my cash flow. 

I've explored commercial loans a little last year, but what I found was that they required more the cash down (25% or more), which would quickly drain my reserves, and have higher interest rates-, which again would mean a higher monthly payment and cut into my cash flow? 

If I use commercial loans for my next few properties, should I plan for lower cash flow and rely more on appreciation?

Appreciate your thoughts on this...

@Mark J. Have you looked into the national asset based lenders?  We used them for a couple refi's here in CT and they had shorter seasoning periods than the conventional lenders.

Completely agree with @Andrew Syrios though, you want to take the time to try and develop relationships with local portfolio lenders.  Those are the way to go if you can get a bank that is open minded enough and understands what you are trying to accomplish. 

Thanks @Kurt McDowell and @Michael Noto -- appreciate your responses. 

Could you offer some leads on the lenders that you or your colleagues have successfully used? Feel free to PM the info if you don't want to publicly post the info. THANKS! 

Also, what kind of terms are you typically getting with those lenders?

I really like my lender, Visio Loans, I reccomend giving Missy a call. I am hesitant to post this because I have posted this many times at the risk of looking like a I get a kick back or something... I don't. I just really think they do it right for BRRRR investors who want to do more than a few a year and want more than 20. Terms are around 6% depending on a few things, but no tax statements required, etc., and no recourse / 30 year fixed! So contact Missy at:

Missy Hileman

Account Executive

Visio Lending | www.visiolending.com

PM me if you can't find her contact details online

I was wondering the same thing as original poster... I can't even refi out of my HELOC with a ton of equity cuz it's rented. I must be asking the WRONG people!!

I want to get rid of the greedy HELOC that keeps going up and just refi into a regular loan, to save on monthly costs.  No one can refi when I tell them it's a rental. :(

@Kurt McDowell   Visio has taken me out of a few of my deals they seem to be on the ball.

as for the OP  you can't have your cake and eat it too... if you want cheapest rates least leverage you have to pay in time. If you want to cut your time and scale you need to pay a little for that.. depends on what you want to do

like @Andrew Syrios   we only deal with community banks.. but to be fare and balanced they usually will only deal with someone who lives in their foot print.. All though I just got a 7 figure line of credit from a bank out of state but it took 3 years and a we have pretty solid financials. Like I am sure Andrew has...

@Mark J. I invest in SFR in St Louis. I have completed 3 BRRR method rentals in the last 6 months and am working on my 4th (just got it under contract).

The way I do this is through a HML and gap funding lender so that I am $0 out of pocket with a rehab budget as part of the HML. It then takes me about 6-8 weeks to rehab and refinance with a "terms refinance". This is different than a cash-out refinance as I am not getting cash out (though I can get 2% of the loan up to $2k in cash), rather I am refinancing the HML into a 30year fixed rate loan. I end up being about $5-$8k out of pocket after the refinance given a good ARV calculation (the goal is $0 out of pocket, but those are almost impossible to find).

The only caveat to this strategy is that I have to put all these loans and houses in my personal name. After 3 payments though, I quit-claim deed the house to my LLC, then only have the mortgage in my personal name (bank could technically call the loan, but 99.9999% of the time they don't - my bank even told me they wouldn't as long as I was current on payments).

I hope that helps you! Good Luck!

@Mark J.

I read a post the other day from @andrew postell and this is one way to do it so you can do multiple BRRRR's a year (I copied and am pasting what he posted):

2. Buying a home with Cash

Buying a home with cash has become increasingly popular for many investors but often an investor will be caught with the restrictions to cash out loans if they need to get their money back. There is a plan to avoid this entire section (In section 3) but it is important for us to know about these restrictions. If an investor is buying with cash and flipping they get their money back when they sell the property. But if they are seeking to hold a property for any length of time and want their cash investment back there are some important rules to understand with conventional loan:

  • If you buy a property with cash (or with a HELOC) you can receive a cash out loan on Day 1.
    • There is not a 6 month waiting period with receiving a cash out loan if you purchased a home with cash or with a HELOC
    • BUT you will be limited to the amount of….
      • Your purchase price + closing costs (costs when you purchased the home)
      • OR
      • 75% of the “After Repair Value”…

WHICHEVER IS THE LOWER AMOUNT (super important)

Hope this helps...

Jorge

@Lane Forhetz this is how Turnkey worked prior to 08 as a HML I did darn near 2,000 of these loans for investors over a 6 year period and would get paid off by the refi.. I see its coming back.. but when refi died HML and borrowers got fubared so its taken 10 years to come back LOL... and in those days you could get up to 10% cash back... investors were suppose to use those funds for reserves but most went and bought a car or a boat or a vacation and left themselves with no reserves and when the crash hit and the had vacancies they had no reserves to keep their units going and that's were a good portion of foreclosures came from highly leveraged no reserve investors. Just saying...

@Jay Hinrichs , WOW, I did not know that! Thanks for the information. I think this market is on a more solid foundation than it was then. Hopefully things will continue in a positive manner. Like you said though, you need to be conservative...

@Lane Forhetz lending is just all coming full circle most of us HML lost millions between 08 and 2010 when refi's froze.. so we are pretty jaded to do this type of transaction these days.. but you have a whole new crop of lenders who were not around then and so off you go.. take what is given and use it to your advantage. Just keep those reserves don't blow the dough like so many who came before you did .

it was not uncommon for clients of mine to walk out of a transaction buying 4 homes in one escrow get refi cash out of 30 to 40k... and then one year later be calling me about being out of money  LOL>

@Jorge Ruiz - yes, the "delayed financing option" enables you get back what you paid + closing costs, but the BRRRR model is dependent on creating 25% equity through the renovation so, at a 75% LTV cash-out refi, essentially you have little to none of your own money tied up and can continue to recycle that cash and build passive income prosperity!

@Kurt McDowell - thanks for the lead. I just spoke with Missy and we reviewed some options. They have a few products that may work, specifically a 7/1 ARM with a five-year sliding scale pre-payment penalty (5% if you sell/refi in year 1 down to 1% if you sell/refi in year five and beginning year six I could refi with no prepayment penalty). So far, I had only been thinking 30-year fixed, but since I'll likely be holding properties at least five years, the 7/1 ARM with a 30-day seasoning period may just be the solution I'm looking for. THANKS for the lead.

@Jay Hinrichs - Yup, definitely want to have my cake and eat it too! ;) But if I want to progress as a real estate investor, clearly I need to begin to plan for the pros and cons of business lending.

Appreciate everyone sharing their knowledge and experience!

Originally posted by @Mark J. :

@Andrew Syrios -- I've looked into that briefly, but as you noted, the amortization is shorter which would make the monthly payment higher and cut into my cash flow. 

I've explored commercial loans a little last year, but what I found was that they required more the cash down (25% or more), which would quickly drain my reserves, and have higher interest rates-, which again would mean a higher monthly payment and cut into my cash flow? 

If I use commercial loans for my next few properties, should I plan for lower cash flow and rely more on appreciation?

Appreciate your thoughts on this...

I would recommend to use Fannie when you can and use community banks the rest of your time. Yes, it will cut into your cash flow, but it will allow you to continue building and you will be paying down principal faster along the way. Regardless, once you hit 10 with Fannie, you won't have a choice.

Originally posted by @Lane Forhetz :

@Mark J. I invest in SFR in St Louis. I have completed 3 BRRR method rentals in the last 6 months and am working on my 4th (just got it under contract).

The way I do this is through a HML and gap funding lender so that I am $0 out of pocket with a rehab budget as part of the HML. It then takes me about 6-8 weeks to rehab and refinance with a "terms refinance". This is different than a cash-out refinance as I am not getting cash out (though I can get 2% of the loan up to $2k in cash), rather I am refinancing the HML into a 30year fixed rate loan. I end up being about $5-$8k out of pocket after the refinance given a good ARV calculation (the goal is $0 out of pocket, but those are almost impossible to find).

The only caveat to this strategy is that I have to put all these loans and houses in my personal name. After 3 payments though, I quit-claim deed the house to my LLC, then only have the mortgage in my personal name (bank could technically call the loan, but 99.9999% of the time they don't - my bank even told me they wouldn't as long as I was current on payments).

I hope that helps you! Good Luck!

Yes, the bank calling the loan is an issue.  If you ask most banks if they will... they do and they will!

So, I'd be very careful going this route. 

Originally posted by @Andrew Syrios :
Originally posted by @Mark J.:

@Andrew Syrios -- I've looked into that briefly, but as you noted, the amortization is shorter which would make the monthly payment higher and cut into my cash flow. 

I've explored commercial loans a little last year, but what I found was that they required more the cash down (25% or more), which would quickly drain my reserves, and have higher interest rates-, which again would mean a higher monthly payment and cut into my cash flow? 

If I use commercial loans for my next few properties, should I plan for lower cash flow and rely more on appreciation?

Appreciate your thoughts on this...

I would recommend to use Fannie when you can and use community banks the rest of your time. Yes, it will cut into your cash flow, but it will allow you to continue building and you will be paying down principal faster along the way. Regardless, once you hit 10 with Fannie, you won't have a choice.

Yes, once you've got 10 Fannie loans, once option is going to portfolio lenders. Their products have much less attractive terms (ex. 7-8%, shorter amtzn period, etc.), but it's possible to still cash-flow... 

What determines whether or not you to continually recycle all of your money has more to do with how much value your able to generate with each deal... example: if you're able to acquire at a below market price then in crease it's value by 25%, then there are products which should allow you to recycle your money indefinitely.  Unfortunately, with prices levels where they are in most cities nationally, that's becoming more difficult to do.

This year (or in 12 months) I'll do that many commercial deals.

* 80 unit apt
* 110 unit apt
* 35 unit apt
* small strip center
* church+school+land deal
* NNN car dealership (Tesla!)
* 145 unit + two commercial spots.

And that's if no surprise blue birds hit in next few months.

"Trick" is to be capitalized (or have access to OPM) and have good lending relationships.

" For investors like me, who only have the capital to purchase + reno one property at a time, that limits me to two BRRRRs per year"

You just answered your own question. Those doing more are using OPM or HML

Originally posted by @Lane Forhetz :

@Mark J. I invest in SFR in St Louis. I have completed 3 BRRR method rentals in the last 6 months and am working on my 4th (just got it under contract).

The way I do this is through a HML and gap funding lender so that I am $0 out of pocket with a rehab budget as part of the HML. It then takes me about 6-8 weeks to rehab and refinance with a "terms refinance". This is different than a cash-out refinance as I am not getting cash out (though I can get 2% of the loan up to $2k in cash), rather I am refinancing the HML into a 30year fixed rate loan. I end up being about $5-$8k out of pocket after the refinance given a good ARV calculation (the goal is $0 out of pocket, but those are almost impossible to find).

The only caveat to this strategy is that I have to put all these loans and houses in my personal name. After 3 payments though, I quit-claim deed the house to my LLC, then only have the mortgage in my personal name (bank could technically call the loan, but 99.9999% of the time they don't - my bank even told me they wouldn't as long as I was current on payments).

I hope that helps you! Good Luck!

 Very interesting.  Sent you a message 

Originally posted by @Jon S. :
Originally posted by @Andrew Syrios:
Originally posted by @Mark J.:

@Andrew Syrios -- I've looked into that briefly, but as you noted, the amortization is shorter which would make the monthly payment higher and cut into my cash flow. 

I've explored commercial loans a little last year, but what I found was that they required more the cash down (25% or more), which would quickly drain my reserves, and have higher interest rates-, which again would mean a higher monthly payment and cut into my cash flow? 

If I use commercial loans for my next few properties, should I plan for lower cash flow and rely more on appreciation?

Appreciate your thoughts on this...

I would recommend to use Fannie when you can and use community banks the rest of your time. Yes, it will cut into your cash flow, but it will allow you to continue building and you will be paying down principal faster along the way. Regardless, once you hit 10 with Fannie, you won't have a choice.

Yes, once you've got 10 Fannie loans, once option is going to portfolio lenders. Their products have much less attractive terms (ex. 7-8%, shorter amtzn period, etc.), but it's possible to still cash-flow... 

What determines whether or not you to continually recycle all of your money has more to do with how much value your able to generate with each deal... example: if you're able to acquire at a below market price then in crease it's value by 25%, then there are products which should allow you to recycle your money indefinitely.  Unfortunately, with prices levels where they are in most cities nationally, that's becoming more difficult to do.

The community banks we've been working with have been given us rates around 5 to 5.5%. If you're getting offered 7, I would keep looking. I'm pretty sure no matter where you are, you can beat that. 

Call a bunch of your local banks. In 2009-2011 I called well over a hundred local banks and found a few that would do what I need. Now lending is easier, so you should be able to get a lot. You can also use other banks to negotiate for your loan. The standard commercial loan is 20-25 years with interest rates a bit higher, but I have been able to get 25 year Am, 10 year balloon at 4.25% interest very recently. 

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