Done with the B-R-R....now how do I refinance?

16 Replies

Hello All, Closed on my first property back in February. Now have actual tenants moving in a few weeks from now. I’m attempting the BRRRR strategy but I’m not sure how to go about refinancing my initial loan. I have a SFH that I purchased for 50K put around 6K of cosmetic rehab into it (paint & carpet was really all the interior needed did some landscaping myself for curb appeal) got the down payment of 10K from my 401K. Mortgage is for 40K. Where do I go from here or what steps should I be taking I refinance and pull my initial 10K investment (or at least some) out to purchase property number 2. Thanks in advance for all the help! Regards

Shop around to your local credit unions and small banks. My guess is you’ll have to wait a bit. Not just because it’s only been 4 months, but because at a loan to value ratio of 75-80% on refinance, you simply don’t have enough equity yet.

you did not BRRR you simply bought on terms with it sounds like a short term lender and are now refinancing you will probably need to leave your equity in as it probably not realistic to think your property with only a 6k lipstick paint rehab went up enough to create enough equity to refi out and get your 10K back..

unless you bought way under market to begin with.

Grant

We just purchased a SFM in February as well with BRRRR in mind.

We found a local bank that offered a commercial loan before the 6 month seasoning period. We were able to get a 80% of rehab value on a 20 yr term at 6%.

We decided to wait and do a traditional mortgage since it would return more of our cash and get us a better rate as well as a lower monthly payment. This loan will be determined off of the appraised value of the home, not just the purchase price and rehab amount.

Some local lenders will have products to offer without the seasoning requirement. As far as the equity in the property, that is another matter. Check the comps in the area to determine what you may or may not have in equity.

Congratulations and good luck.

I missed the expected ARV. How much is it worth now and how much does it rent for?

The true end of the BRRR strategy has an SRO.

Seasoning

Rip Off fees.  

I also add a PS for pain and suffering, but some have a higher b.s. threshold than I do. Obtaining a $40k loan will have P&S in spades.

@Grant Mitchell , here you have the chance to tell @Steve Vaughan that you didn't have any pain and suffering getting that $40k mortgage, right? (Or, was he right after all?)

Curious: just how did you go about getting a smaller than $50k mortgage approved?

[Was Jay right about it being a "short term lender"? Ouch!] Good luck...

Originally posted by @Grant Mitchell :

@Dennis W. comps in the neighborhood are 60k-62k

Aah. That means: this particular buy was not a good BRRRR candidate, but, may still give you an acceptable return on your outlay anyway. [In order to get another conventional Refi loan for all your $56K cost, (allowing that your lender might only loan you 70% of their valuation), sold comps would need to be in the $80k range]. Nobody is suggesting that it's easy to find properties that suit BRRRR. At the very least, treat this experience as educational. Good luck...