New to Real Estate · Kamloops, BC · Member since 2021 · 9 posts · 3 votes
I'm confused about the brrr strategy, about the 70% rule. Let's say, the property is priced up for 1,00,000 & there is an estimated repair cost of 20,000. which totals the money I have to spend to be 1,20,000.
if the ARV is at 2,00,000. Then if banks refinance for around 70% ( investment property).
They will refinance on 120,000 right? which is 70% of 120,000= 84000. is this right? , because if that's the case, it's a bad deal I suppose as 84000 is a really low amount ?
In your example, if the ARV is $200K, you may be able to get $140K in a new loan when you refinance. You would use this $140K to pay off the $120K in purchase price + rehab. (There will be closing costs involved in the $140K - you will actually get $140K minus closing costs in funds.)
This is overly simplified. There may be a seasoning period required to get a bank to loan based on the ARV. But this would be an ideal BRRRR.
In your example, if the ARV is $200K, you may be able to get $140K in a new loan when you refinance. You would use this $140K to pay off the $120K in purchase price + rehab. (There will be closing costs involved in the $140K - you will actually get $140K minus closing costs in funds.)
This is overly simplified. There may be a seasoning period required to get a bank to loan based on the ARV. But this would be an ideal BRRRR.