BRRRR refinancing costs high

61 Replies

@Michael Noto, thank you.  

I wondered how long before someone would made this connection.

Originally posted by @Randy Janoe :
Originally posted by @Mary K.:

@Randy Janoe who is your banker that does 85%

 A Community Bank in western NC. If you are interested in using his services, I could see if he will entertain out of state deals?

Pm me if you find he will

Originally posted by @Michal Sypolka :

@Jeremy England I just refinanced my rental. I also wanted to go with a local broker but their fees were high. I ended up going with Better.com, which partners with BP. Their fees are low and I believe you get a $500 credit through BP. The entire paperwork process was done online and was very smooth.

 Thank you for that referral. I will definitely look into that

Originally posted by @Natalie Schanne :

@Jeremy England - Congratulations on your deal. Going forward, is this the best you can expect to do in your market? If you can get a 100,000 Sofi loan, you must be doing very well personally. Try thinking outside the box in RE. My friend bought a 2000sf house in NJ for about 200k all-in near a college and gets $5000/mo (owner pays utilities) renting by the furnished bedroom to working professionals. borrowed 100% of the money at 7% from friends and family. So after taxes (600), utilities (900), and interest (1200), there’s still $2300/mo of cash to pay towards additional rehab / beautification and/or paying down the loan. Now this is more management (higher turnover) than a tenant who might stay in your house for the next 6 years, but could the cash flow be worth it?

 If i were your friend getting 2300/mo in cashflows i would hire someone and have true passive mailbox money

@Jeremy England

I'm having a hard time figuring out what the problem is with this deal. All of us would love to not have a dime in all of our projects and cash flow $1,000 per month on every property. But it looks like you have a house that is worth about $100,000, bringing in 1% gross per month and you will only have 7k in the deal. So, cash on cash looks like 58.3% if I calculated correctly. What more could you ask for? Remember the tenant is paying the interest and points on the loan, not you. Get your money out of the deal and move on to the next one. 

Originally posted by @Kristopher Hanks :

@Jeremy England

I'm having a hard time figuring out what the problem is with this deal. All of us would love to not have a dime in all of our projects and cash flow $1,000 per month on every property. But it looks like you have a house that is worth about $100,000, bringing in 1% gross per month and you will only have 7k in the deal. So, cash on cash looks like 58.3% if I calculated correctly. What more could you ask for? Remember the tenant is paying the interest and points on the loan, not you. Get your money out of the deal and move on to the next one. 

 Nothing is “wrong” with the deal per say.  Just putting my experiences out there with the brrrr strategy.  Im just posting my experiences so others can offer feedback and perhaps learn some things.  

Originally posted by @Jeremy England :

 Most investors would be pretty happy with only a few grand stuck in the death and cash flowing.

The 100k at 5.50% on 30 year AM/Term (Aka a fannie mae loan) would be around 550 per month and I'd guess your taxes and insurance are around 150 per month maybe?

This should leave you with a margin of 300 or so for repairs, cash flow, and misc.

Every 10k at 5.5% on 30 yr AM/Term is roughly 55 bucks a month so if you reduce your loan by this amount (aka keeping your money in the deal or refinancing with a smaller loan than 100k) will improve your cashflow by 55 but lowers your cash on cash return since you have 10k more stuck in the deal and cash flow / cash in the deal will result in a lower %.

Looks like you're doing well with only a few grand, overall yeah?

With BRRRR these days it is nearly impossible to refi with none of your own money in the project. That was easier a few years ago, but the purchase price of distressed properties has been pushed up by the popularity of rehabbing. That means smaller margins and less opportunity to create the equity you need to cover your downpayment.

We are in the middle of a BRRRR that will likely result in no cash invested, but we had to get creative: bought a duplex, splitting it into 2 zero-lot-line properties, selling one to a friend. Rent and refi the other side, and should have no cash down at that point. This is in a neighborhood of identical properties, so we're hoping to keep doing it if this one turns out well.

Outside of something unusual like that, BRRRR will require at least some of your own cash 99% of the time.

definitely shop around lenders. heard sever people before refer Penfed CU as their preferred lender. you don't need to have an escrow account if you're already putting in 20%+ equity (possibly lender-specific). 

Originally posted by @Albert Bui :
Originally posted by @Jeremy England:

 Most investors would be pretty happy with only a few grand stuck in the death and cash flowing.

The 100k at 5.50% on 30 year AM/Term (Aka a fannie mae loan) would be around 550 per month and I'd guess your taxes and insurance are around 150 per month maybe?

This should leave you with a margin of 300 or so for repairs, cash flow, and misc.

Every 10k at 5.5% on 30 yr AM/Term is roughly 55 bucks a month so if you reduce your loan by this amount (aka keeping your money in the deal or refinancing with a smaller loan than 100k) will improve your cashflow by 55 but lowers your cash on cash return since you have 10k more stuck in the deal and cash flow / cash in the deal will result in a lower %.

Looks like you're doing well with only a few grand, overall yeah?

 The loan is actually 75k with payments of 475:mo. (No escrowing of taxes and ins)

Im working it out with a credit union for better terms.  They had a survey fee on there, indont think one is required, escrowing of taxes and insurance.  So the 8k figure will realistically be as low as 6000.  Ill probably just pay the difference in the mtg and personal loan prior to closing so that will be another 3k.  Probably go to closing paying 2500.  

Im fine with how it turned out. Next one however i hope to spend even less of my own money.   If you spend 5-7k each house, hopefully by the 3rd home it is self sustaining.  Meaning the profits from the annual rents are all you need in terms of money for the brrrr strategy

Thought i'd update everyone following this thread.  New survey came in 18000 higher, so my cash outputs for this property are going to be about 3k, that's only the interest paid on the loan.  No cash needed for closing.  So it looks like it will be closer to a true brrrr deal.  

Just for a headcheck, my last brrrr refi from Chase came in at 6% with half a point and about $3,100 in closing costs. It was before the EOY rate drop and they were the only ones willing to let me quitclaim out of the LLC I bought it in at close (should have bought in personal name. Live and learn). But its cashflowing and thats still better than commercial rates.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here