I would like to get started with my first investment property, I have been looking into East Orange. The properties I have looked at will need some rehab, so if I am able to acquire one of these properties I would like to do the BRRRR strategy and my exit plan would be to refinance it. Is it possible to use the equity in the house after repairs towards the down payment on the refinancing mortgage, so in other words I do not have to come out of pocket for this? I would also appreciate any advise on potential lenders in ESSEX county. Thanks in advance.
Hi @Julian Perez yes you can. You just touched on the concept of forced appreciation, or sweat equity. If the repairs you make to a home add more value than they cost, then yes, that extra value will get counted towards the equity on a refinance. I wrote a blog post that dives deep into the numbers behind the strategy if you're interested:
@Alex V. , thank you for your input and the link to your blog. It was very informative.
I might have misunderstood you, but yes, the idea behind BRRRR it to use the equity in the property as the "downpayment" so you can be into the property for nothing or very little at least. That being said, there are often challenges in real estate and it's not uncommon to go over budget a bit on the rehab. So even when doing BRRRR or another low money down strategy, I still firmly believe you need to have some money in the bank in case things go a bit sideways.
@Andrew Syrios , I appreciate the feedback Andrew thanks
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