BRRRR - Keep or Sell Due To Higher Rates & Seasoning Changes

BRRRR - Buy, Rehab, Rent, Refinance, Repeat
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BRRRR - Keep or Sell Due To Higher Rates & Seasoning Changes

David Millot
Investor · Hillsboro, OR · Member since 2018 · 12 posts · 6 votes

My BRRRR is ready to refinance after 6 months of seasoning, and (surprise surprise) rates went up significantly more than I had anticipated. Add to that the reno took more $$$ than originally budgeted, and my updated deal analysis shows negative cashflow for several years if I refinance now at 7.5% on 80% LTV of $350,000 ARV. Do I 1) refinance now regardless of rates 2) Wait to refinance a few more months and keep an eye on the market (seasoning requirements changing to 12 months?????), or 3) sell now and move on.

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Jay HurstBusiness Member
Lender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
3y
Quote from @David Millot:

My BRRRR is ready to refinance after 6 months of seasoning, and (surprise surprise) rates went up significantly more than I had anticipated. Add to that the reno took more $$$ than originally budgeted, and my updated deal analysis shows negative cashflow for several years if I refinance now at 7.5% on 80% LTV of $350,000 ARV. Do I 1) refinance now regardless of rates 2) Wait to refinance a few more months and keep an eye on the market (seasoning requirements changing to 12 months?????), or 3) sell now and move on.

 @David Millot  Seasoning periods on Fannie/Freddie are changing to 12 months. That is a fact.  Cash out rates are a bit higher and of course the higher your balance the higher your payment. So, maybe simply refi what you owe on this one and get out of what is maybe a high rate hard money loan.

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  • Eliott Elias
    Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
    3y

    Depends on your goals, if you have other projects you are working on refi now and move on. 

    0Reply
  • Riaz Gillani
    Lender · Member since 2021 · 99 posts · 164 votes
    3y

    Depends on your goals and the opportunity cost of the money you'd have to tie into the property. Do you have enough liquidity to refinance and begin on a new project? If not, I'd probably sell and move on. Underwrite with more scruitny on the next deal. 

    When you're first starting out, it often makes the most sense to go into a deal thinking to flip and only BRRRR'ing if the equity is there. Until then, keep building up your cash vault.

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  • Jaron WallingPro Member
    Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
    3y

    How much $$$ are you into the property? How negative is the CF? Who said you have to take 80% LTV? Spring is around the corner and I expect plenty of buyers to be on the hunt for houses this year. You have good options here.

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  • Jay HurstBusiness Member
    Lender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
    3y
    Quote from @David Millot:

    My BRRRR is ready to refinance after 6 months of seasoning, and (surprise surprise) rates went up significantly more than I had anticipated. Add to that the reno took more $$$ than originally budgeted, and my updated deal analysis shows negative cashflow for several years if I refinance now at 7.5% on 80% LTV of $350,000 ARV. Do I 1) refinance now regardless of rates 2) Wait to refinance a few more months and keep an eye on the market (seasoning requirements changing to 12 months?????), or 3) sell now and move on.

     @David Millot  Seasoning periods on Fannie/Freddie are changing to 12 months. That is a fact.  Cash out rates are a bit higher and of course the higher your balance the higher your payment. So, maybe simply refi what you owe on this one and get out of what is maybe a high rate hard money loan.

    Hurst Real Estate, INC4.991 Reviews
    WebsiteView Page
    1Reply
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