Can't find a bank to cash out refinance our BRRR

14 Replies

We have finished our second BRRR and can't find a lender to do a cash out refinance for us. It is actually our first rental property and has been rented for 1.5 years. Lenders are saying our income is too low. Our personal income is extremely low, but we have 4 single family's rented and are almost done with our third BRRR (not rented). Any advice on a lender who can refinance for us? We live in Atlantic and the ARV for these two houses will be 70k and 90k. We'd love to get our money back out to purchase more houses. Thanks!

@Jessica Roland BRRRR isn't exactly a sustainable concept...and it appears you've found out. You'll need to move to a private lender, or get a commercial loan...maybe blanket your properties. Just be prepared to have adequate reserves or have the loan secured by the properties...

Did you have any luck? I'm also having trouble finding a lender for a cash out refi. My issue isn't income though, its comps for my renovated 4 plex. Do people find it harder to BRRR with multi-plexes than SFR due to lack of comparable sales proving the increased value after renovation?

@Ashly B. I'm still 'in process' with two banks. One is Ridge Lending Group based out of Oregon. I think they were a contact through Geneva Solutions (something like that). The other is Mark Steger at Iowa Mortgage Solutions. I am wondering if he might work out better for us.  I'd love to hear how the refinance works for you as we would like to buy a small multifamily next.

Got a lead on a bank and its going well and looking promising. It would be a commercial loan and we're at the point where they've said its a green light pending appraisal and estimated the cost at $300-400. Told them to schedule it. Lender comes back and says since its "not a traditional rental" and sits on 2 lots its going to cost more and says the cheapest they've found is $600. I'm not saying $300 is going to make or break my cash out deal but $600 for an appraisal is absurd, especially when I both purchased and later refi'd this specific property and neither time did it cost me more than $300. 

Makes me feel like 1) its a shady move and 2) if I drop $600 on an appraisal and it comes back low I'm going to be livid. Keep looking or suck it up?

Originally posted by @Ashly B. :

Got a lead on a bank and its going well and looking promising. It would be a commercial loan and we're at the point where they've said its a green light pending appraisal and estimated the cost at $300-400. Told them to schedule it. Lender comes back and says since its "not a traditional rental" and sits on 2 lots its going to cost more and says the cheapest they've found is $600. I'm not saying $300 is going to make or break my cash out deal but $600 for an appraisal is absurd, especially when I both purchased and later refi'd this specific property and neither time did it cost me more than $300. 

Makes me feel like 1) its a shady move and 2) if I drop $600 on an appraisal and it comes back low I'm going to be livid. Keep looking or suck it up?

Commercial appraisals are routinely $600-650 these days. Usually they cost this much because the lender is adding money on top of the AMC's charge and the appraiser is adding a charge to do the comp rent schedule. Sorry, but it's one of the many added costs of Dodd/Frank.

Stephanie

Our appraisals have been 400-600. One was even more. The bank said it was from doing rental comps and being in a rural area.  We hired the same appraisal privately once and were only charged 250.  Services that you 'can't shop for' are a rip off. Fork the money over, and if the property is worth it, 2-300 won't make a difference in the long run. :) I just hate walking away from a deal after paying for an appraisal.

Not sure if you're still working on this, but Todd Bukaty with nbkc bank in Kansas City (if you google "Todd Bukaty nbkc" he's the first thing to pop up) was able to help my sister with a refi on their rental property in ATL, and they have very low income. And at the time it was their only property.

@Jessica Roland

It's nice when they do internal appraisals.  Different banks have different processes - but this saves a bundle.  I suspect that as part of what is considered in doing a full blown appraisal, your overall risk profile and DSR (Debt Service Ratio) will be looked at.

You have to be careful about your assumptions and ensure that the stuff you're adding to your portfolio is capable of producing the income where that looks favorable, especially if you don't have other earnings (or much of them). 

Although our portfolio is growing substantially and we've got solid income coming in, I'm not sure that it's quite at the point where it would stand alone on its own and command financing options (without my wife's W-2 income). BRRRR sounds great but you need to make sure you're getting the right assets and always be thinking about next steps.

Jim