Does the brrrr strategy work with 3% down conventional loan?

12 Replies

@Victor S. My mortgage lender told me 3% down at quickenloans, yea that’s the plan to live in it for some time and renovate it to later rent and refinance but I know that the majority buy the property outright with hard money or private money lenders to fix up and buy then get a conventional 30 year loan at 75% arv but this strategy requires a property basically being paid for 100% before the 30 year loan

yeah, i don't see why you couldn't do it. people use hml for fast closing in competitive markets to flip said properties quicker. if your timeline allows for a longer time-frame, then i don't see why you couldn't do it (as long as you don't try and flip it in 6 months lol)

Originally posted by @Leonardo Gonzalez :
@Victor S. I would refinance later on and rent out but fully flip, no. Buy and hold strategy for life lol but would I still be able to refinance if I have such little equity but I invest 15K into renovations? (150k property)

 why wouldn't you? banks love charging you fees. what's the purchase price?

@Leonardo Gonzalez It is possible to use the BRRRR strategy on a 3% down loan situation but in order to end up with enough cash at the end of the transaction to turn it into another property you'll have to get a better deal then you would if you were using a conventional mortgage with 20% down or paying all cash. I bought a 3 unit property for $120K using FHA 3% down, put $10K into it and it appraised for $160K I would have liked to use the BRRRR strategy and refinance and repeated but I could only refi for 75% which would have been $120K which wouldn't really leave me with anything left to "repeat" with. I would just have a new mortgage with 25% equity. I'm not saying it's a bad deal, I'm just saying it takes money to make money. the BRRRR strategy is about recycling money. if you only have 3% into the deal there isn't much money to recycle. But if you could find a $100K property with 3% down, put $10k into it and get it to appraise for $200k then you would have some room to work, but that would be an exceptional deal.

Originally posted by @Leonardo Gonzalez :
@Victor S. 150k

what about ARV? you have to be buying low enough, so that even $15k in repairs will allow you to extract your cash back at 70-80% ltv on the refi. quadruple check your arv and make sure market conditions allow for continued trends.

@Luan Oliveira I considered it but it would only be $80/per month I would be saving in PMI and with the refi fees and the fact that interest rates are quite a bit higher than when I got the original mortgage it doesn't make since to refi just to drop PMI.