BRRRR With Financing.. Does it work?

7 Replies

Hello Bigger Pockets Community,

I know that it is most preferable to buy a property with cash for the best result in BRRRR. But I was wondering if anyone has found success doing the BRRRR method with a financing option? If so, do you have any tips / advice?

Would greatly appreciate hearing experiences from others!

Hey Sam, you can definitely BRRRR with financing. I did my first two projects like this. One thing I did not think about is the higher closing costs at purchase then AGAIN at refinance. Typically with cash or other options, the closing costs are less painful.

The process is the same, but you will probably lose some deals that can't be financed due to condition of the home or motivated sellers may only want a cash offer. 

It all depends on your market and your strategy there, but one of those R’s is refinance meaning you had financing and then refinanced to get cash out or a lower rate. Not all BRRRRS are bought with cash, so it is certainly part of the method.

As Sean pointed out, you do have financing costs twice and if your method is to find heavy rehabs, some of which may not be financeable through conventional/FHA/VA loans, then you would need a hard or private money lender to fund those.

The one-stop-shop for REI
Find Local Home Improvement Pros!
Check out our network of trusted, local contractors for all of your home improvement projects.
Find a Contractor

@Jon Kelly

I have a house I paid cash for in 2015, took a loan on it in 2019 to buy another house. Total bank fees was $885.00. Great small local bank, closer to you than me.

@Sam Dykes you can, however you will not have as much leverage over the seller as cash buyer can by waiving certain contingencies. Also you are doing 2 loans so your closing cost is higher. Overall it's much harder to find deals where the numbers work doing BRRRR with financing.

@Sam Dykes I use private money for all of my BRRRRs so it is definitely possible. Closing costs suck because I pay more at purchase than if I paid cash, but I factor that in when I run my numbers and I make it work. Because of the relationship with my lender I am also comfortable offering cash so as far as the seller is concerned there is no risk of the deal not going through because of financing not working out. Side note there though - I usually have or can come up with enough cash to close if I had too.