I will be meeting with my father in law next week with hopes to begin a REI partnership. At this point, all of my research has been poured into the BRRRR strategy as the most effective means to begin building my portfolio. However, my FIL sounds like he has concerns about the refinance portion of the BRRRR method. And it so happens that it is the most blurry portion of the method for me as well.
At the point of refi, assuming appraisals are in order, you can cash out up to 85% of the appraised value. How does this affect the mortgage? Does it essentially take you back to square one, wiping out your equity in the property? I am trying to learn more about refi as well as create a successful "pitch" to my FIL so that we can move forward with the BRRRR.
Thanks in advance!
Wiping out the equity? No, it returns the equity to you. Then you can buy the next house and renovate it, refinance, and do it all again.
Cash out is not usually to 85%, but more 60-75% on investment property.
The BRRR strategy is a great option. To cash out refinance on an investment property with conventional is 75% for a single family and 70% for a multi-family.
You could only get an LTV of 85% for a refinance without cash back on a single family investment property.