How to put Reno on HUD at time of closing (brrrr method)

Question

Anyone familiar with how to put the renovations on a HUD before the work has actually been done? Closing on our first NJ project this week and the attorney said we cannot show future expenses on the HUD. We are looking to do this so that we get the full investment value back when we go for the LTV. Thanks

Matt Devincenzo · Answer

Yeah..

https://www.biggerpockets.com/blog/work-with-lenders-brrrr-methodI'm fairly certain he also started a forum post where he discusses it, but this Blog post goes into it as well.

Matt Devincenzo · Answer

@Michinori Kaneko the reason to place it on the HUD is when using the delayed financing exception, you can borrow 70% LTV on the new appraisal up to the original HUD amount. So by including it on there you can finance the entire price...a member on here has become well known for figuring out this method and begin able to extract 100% of his funds using a conventional loan in less than 6 months.

@Anthony Iemmello assuming you still want to pursue this, you (should) just need to submit your contractor's proposal to escrow as a bill. They will include it as an item to be paid from the closing funds. IT has no impact to the seller, and will just increase the $$$ you bring to close. The advantage is as noted above you should be able to refi it out in less than 6 months, assuming that is the strategy you are pursuing.

Chris A. · Answer

Hey Matt,

Thanks for the additional information on the delayed finance exception. Please let me know if I'm understanding this correctly: if I have the proposed rehab costs included on the HUD (say $30k) then that means I must have that $30k available in cash at closing?

Anthony Iemmello · Answer

@Matt Devincenzo

Got it thanks Matt, I think we are actually going to go a different route after speaking to the mortgage broker. Not going to go through a bank bc of the seasoning period so it looks like we don’t need to include the reno in the HUD in this case. Just wanted to cover all my bases since we closed on the props today. Thanks again

Michinori Kaneko · Answer

@Matt Devincenzo Interesting. you are telling me you can do BRRRR with freddie/fannie loan with no seasoning period? Where can i fore details about this?

Michinori Kaneko · Answer

Hey i quickly glanced through the article but saw nothing about RENO included in HUD? HUD is a settlement statement with your seller so it doesn't make sense to put that on a HUD.  In either case, like i've mentioned, your refi will be based on your ARV so it wouldn't matter.  There are some lenders that will ONLY lend up to your purchase price though, so avoid those lenders.

Anthony Iemmello · Answer

@Wayne Brooks

Ok makes sense, I’m using a mortgage broker and just wanted to double check thanks

Anthony Iemmello · Answer

@Michinori Kaneko

https://www.biggerpockets.com/blog/brrrr-buyrehabrentrefinancerepeatprimer

This article says to put Reno on HUD

Wayne Brooks · Answer

Most banks will refi, before you meet your seasoning requirement to use the Appraised value, on purchase price Plus repairs....no need to try and get them on the HUD, as I have seen some suggest.  Ask your specific lender.

Michinori Kaneko · Answer

why would you put a renovation cost on a HUD?  why would you need that in the HUD anyways, when you refi the amount you recover is based on your ARV, not how much you invested?

How to put Reno on HUD at time of closing (brrrr method)

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