First timer here. Would appreciate sharing your knowledge.
I've been analyzing many properties and came across a struggle. When you do a BRRR, you want to get ARV as high as you can so that you can get most (if not all) of the money you invested. However, if your ARV comes out too high (at the appraisal for cashout refi), then you also need to pay higher mortgage that compresses your CF. It seems to me that fighting for higher ARV (to get as much as money out of the property) when getting appraised for post-rehab property is a double-edged sword. Am I missing something? Will the lender for cashout refi be using some other appraisal value when coming up with the loan amount vs. down payment, instead of ARV?
If your ARV is higher than you expected, that does not mean you have to cash out the max amount. You can pull as much or as little as you want as long as you are below the Loan to value your lender will allow you to pull.
You may certainly pull the max amount as you can, and in this case yes your payment will be higher if you pull out more cash.
First timer here. Would appreciate sharing your knowledge.
I've been analyzing many properties and came across a struggle. When you do a BRRR, you want to get ARV as high as you can so that you can get most (if not all) of the money you invested. However, if your ARV comes out too high (at the appraisal for cashout refi), then you also need to pay higher mortgage that compresses your CF. It seems to me that fighting for higher ARV (to get as much as money out of the property) when getting appraised for post-rehab property is a double-edged sword. Am I missing something? Will the lender for cashout refi be using some other appraisal value when coming up with the loan amount vs. down payment, instead of ARV?
Thank you for your help in advance!
Hi Saika,
I don't know if ARV can ever come back too high on a refinance... I would think you'd want it as high as possible! Having the ARV come back higher is great in that it provides you with options. You can take out more equity than originally planned (if you can handle/qualify with the increased payment amount) or you can take out the amount of equity that was originally planned at a potentially lower rate (assuming there is a moderate drop in the LTV%). Higher ARV gives your more opportunities but lower ARV limits your possibilities.