BRRR.....?
About a year ago I purchased a seven unit property in a good neighborhood, however the property was in horrible condition. I have since evicted the trouble makers and completely renovated the units along the way. My rents have increased from $500 p/month to $700 per month in each unit i have renovated. I have two units left And my rehab will be complete however I am left with very little capital to continue investments with (down payment + rehab costs for 5 units). The complex cash flows $2,500 per month which is fantastic however I have just learned about the BRRR strategy and need advice.
I purchased the property for $200k and had to put $50k down. My rehab costs are right at $7k per unit and 5 needed renovations ($35k). My total out of pocket is $85k.
From my understanding, it being 7 units, the property is appraised based on NOI/Cap rate. Local Cap rate is 8% for Panama City, Fl. With that math I am seeing that my property should be worth $280 -$300k when I am finished and fully occupied.
My question is this: Do I need to have my property rented at the increased rent for a full 12 months before I try and refinance to pull cash out? Or will the bank use market comparables and refinance after an appraisal. Appraisals on commercial property cost between $2,500 and $3,000 so I do not want to spend that kind of money if the appraiser is going to check my tax return and see a huge list of expenses and vacancies because of the construction.
Any help would be greatly appreciated.
Ramsey