What should I do? BRRR vs selling

10 Replies

Hello,

I'm weighing out options of doing a BRRRR on my primary residence vs selling it. Just wanted some opinions, I ran the numbers and doing the BRRRR details are:

BRRRR

Equity 69K

Bank will give me 80% LTV

Cash out refi $55,200

Cash Flow $125 monthly

I accounted for P&I, property taxes, insurance, HOA, and 10% for a property management company

SALE

Sell 69k equity

Haven't accounted for closing costs yet

Based on this info, I just wanted some opinions from the community. My concern with the BRRRR is the cash flow is not very high and any large repairs would set me back.

Thoughts?

Kbin Bdasu

@Kbin Bdasu If it's your primary residence then how will it cash flow for you after the BRRR? Wouldn't it still be a liability on your balance sheet? Are you house hacking? Moving into a new place?

I recently pulled out the equity in my home as well. Interest rates are so low and home prices so high that I had to take advantage of the rates (and my equity position). The reason why I didn't sell is because in my area when you sell at the top you also have to buy at the top. For this reason I did the refi instead of selling. I missed out on some equity because I'm only getting 80% in the refi vs 100% by selling, but I can use the cash to scale my portfolio and don't need it for a down payment on a new house. Hope that helps!

What would you do with the proceeds?  How much of a profit would you get if you sell?  Do you like being a land lord? Based just on the numbers you are sharing, you should sell.

@Kbin Bdasu Thanks for posting this as I'm over here in Durham/Chapel Hill, NC area and calculating and weighing the exact 2 options, with my primary residence, in order to fund our first investment or two. I ran all the numbers with the assumption that we'd get 70% back from refi, so would you suggest going to a mortgage lender for an estimate prior getting renovations done and a new appraisal? What did you do?

Our stats: 

Bought in 2012 for $187K at, 20% at 4.5% for 30 years

Current value: $288K

Reno costs: $30K (every penny saved)

ABV: $320K

70% from Refi: 224K

Rental averages in the area $1550/month

Using the BP BRRR calculator we too would have about $125/month in cashflow if we got 70% after refi and mortgage insurance.

We are willing to house hack for a year or two and buy a beater for $150K, but I'm not sure the best route either. 

Thanks all!

 

@Josh Bakhshi I was planning on using the proceeds to get into another property to BRRRR with. Right now the profit is roughly 69k assuming I get it for the market value not accounting for closing costs yet (I'm using a conservative 10% for closing costs) and I don't plan on being the landlord, which is why I including the property management cost.

Originally posted by @Kbin Bdasu :

@Josh Bakhshi I was planning on using the proceeds to get into another property to BRRRR with. Right now the profit is roughly 69k assuming I get it for the market value not accounting for closing costs yet (I'm using a conservative 10% for closing costs) and I don't plan on being the landlord, which is why I including the property management cost.

 If you can continue to find properties that you can profit 40-70K on each, keep doing that and buy rentals with cash and then you don't have to worry about making mortgage payments when the house is vacant and you have to spend 5-10K in repairs.

You forgot to subtract maintenance and vacancy from your cash flow prediction.  I use 10% for each of those, most people use a little smaller number than me but it will change your cash flow significantly either way.

@Abigail Campbell those are great profit numbers. A real estate agent could be a good asset on your team to figure out the comps in your area are. As far as the lender for the cash out refi, I got my quote from USAA, but I plan on shopping around for lenders more to see if I could get lower closing costs. 

We're both in the same boat as far as rent not meeting the 1% rule, which is another reason I am exploring the sell option. As far as getting a before and after appraisal, I would just get the after. To determine my property value, I looked at the comps surrounding my area from what recently sold (past 6 months), what is currently contingent under contract, and my real estate agent's 2 cents as far as what he thinks I could get. I'm basing my numbers conservatively. Hope this helps you!

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