What's the most $ that I can pull out of a BRRRR?

5 Replies

I can't seem to find the podcast I listened to, but it discussed something along the lines of setting additional money in escrow at time of purchase to make the home purchase sales price larger than the contract amount. 

For example- 

  • Home Sale: $75,000
  • Cost of repairs: $25,000
  • ARV $150,000

Say I want to refinance after 2-months (delayed mortgage or other). I am being told that the maximum I can refinance is the total amount of the home sale. Which is $75,000. I would have left $25,000 (cost of repairs) in the home.

Can I add $25,000 to the purchase price (in escrow?) pushing the sales price $100,000, which in-turn allows me to refinance at the new purchase price of $100,000.  Thus allowing me to pull all my funds out of the deal when I refi.

Is this possible?  If so, what is this process called and any additional advice is greatly appreciated.

@Adam Soyak you can refinance with cash out at a 75% ARV. $112,500 - current loan (if applicable)- closing costs. If you are correct on the 150K you are very close to getting 100K back. +-.

You can add 25K to the purchase price but most lenders will ask for a purchase agreement and HUD of the original purchase to avoid this kind of borrower's fraud.

It's about the ARV based on the appraisal and if the property is stabilized. Some lenders will not lend to vacant some niche lenders allow it.

@Guifre Mora , thanks for the quick response. For me to cash out at 75% ARV, do I have to wait the 6 months, is that what you mean by "stabilized"? So far my experience has been waiting the 6 months because lenders have told me that the ARV is irrelevant until that point.

@Adam Soyak depends on the lender. some require the property to be "stabilized" (rented at market value) or seasoning- again depending on the lender. Some will ask for 12 mo to 30 days. Vacant or not. Some lenders would lower the LTV on shorter seasoning properties.

Again it a matter of finding a niche lender for your scenario. 


Your (direct) lender is selling you what they offer and if they are (brokers) they should bring you more options for you to decide.

Lenders are like restaurants, you order off their menu. (Not from the menu of the restaurant next door) and brokers are the uber eats of lending. 

After-Repair-Value is a number you place on an estimated value of the property after repairs. 

The appraisal will determine for a fact what is the true ARV based on the market.

If your appraised value is 180K and you projected 150K you will be able to ask for 75% of the 180K.

So if you were to sell this property tomorrow and the appraised value is 180K, would you sell it at 150K because you have not owned it for 6 months? ... of course not.

@Adam Soyak hey Adam, i have at least one lender (probably two) that will do a cash out refi at 75% of ARV after 3 months. the product you would be going into is a 30 year loan, and it was a decent rate (not the lowest i have seen). Let me know. happy to help.

Originally posted by @Ryan Deasy :

@Adam Soyak hey Adam, i have at least one lender (probably two) that will do a cash out refi at 75% of ARV after 3 months. the product you would be going into is a 30 year loan, and it was a decent rate (not the lowest i have seen). Let me know. happy to help.

Hey Ryan,

Sent you a PM.  Thanks!

 

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