Hey guys, hoping for some insight on the "refinance" part of the BRRRR strategy.
I bought a 3 unit building about 6 months ago, 6% down. I had a discussion with my lender today to explore the possibility of a cash out refi after a year or so. She said that with a loan-to-value that high there is no way of pulling cash out, not without a huge leap in appraised value after the "rehab" stage, closer to 20% equity.
Who here has applied the BRRRR strategy with a low down payment purchase, and did you have issues gettig past the LTV? Thanks in advance
Your lender is giving you the answer. In a year, the value of the asset will determine if you have any/enough equity to refinance and take any cash out.
Did you skip the Rehab part? BRRR assumes you bought it in need of repairs and fixed it up, thereby forcing appreciation and increasing that LTV spread. . .and made a cash our refi possible if you want to go that route. If you did work on it it, then sure, in a year, or however long your lender requires, a new appraisal will/may provide that spread.
Updated over 1 year ago
"cash out refi" I reread your post and see that you did rehab it. So assuming you bought at a significant discount, post-rehab and the lender's required waiting time, the new appraisal should be in your favor.
@Rusty Whitney, be aware that NEXT time you wish to use the same idea of buying with low deposit for the purpose of cashing out equity later, then as well as the equity-adding-rehab already mentioned, you should be aiming for additional INSTANT equity - by buying absolute bargains!
(I'm talking 25%+ off as-is value). Any chance your first one does fulfill that? All the best...
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