Done with B-R-R....How do I go about refinancing?

[Grant Mitchell]

Hello All, Closed on my first property back in February. Now have actual tenants moving in a few weeks from now. I’m attempting the BRRRR strategy but I’m not sure how to go about refinancing my initial loan. I have a SFH that I purchased for 50K put around 6K of cosmetic rehab into it (paint & carpet was really all the interior needed did some landscaping myself for curb appeal) got the down payment of 10K from my 401K. Mortgage is for 40K. Where do I go from here or what steps should I be taking I refinance and pull my initial 10K investment (or at least some) out to purchase property number 2. Thanks in advance for all the help! Regards

[Geoff Harris]

Hi Grant,

Congrats so far! Assuming your ARV (After Repair Value, I'm sure you know) is 62,500 or more, you may be able to refinance an 80% loan-to-value (LTV) mortgage to get 40k to pay off the current note and 10k for your 401k or next deal. Some lenders may require 25% or 30% equity to remain since it's clearly not a primary residence now, but if your ARV is now higher than 62500, you could be fine there. Technically, it will be a cash-out refinance, since you're harvesting money beyond just paying off the current note. I'd recommend talking with 2-3 lenders to get the best LTV so you can pull the most $$ out for your next deal. I'm sure you know this as well, but make sure the closings costs are taken into account and that your new PITI doesn't exceed your rent+expenses.

I'm sure there are folks around BP who know more about this than me, but those are my thoughts. Best of luck!