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BRRRR - Buy, Rehab, Rent, Refinance, Repeat

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Inga Davis
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BRRRR cash out refi - higher interest rate to get 80% LTV instead of 75%?

Inga Davis
Posted Mar 21 2024, 02:33

Hello all,

I bought my first rental property in Columbus OH using the BRRRR method and money from my HELOC on my primary residence. I am now trying todo a cash out refinance to pay off my HELOC so I can repeat the process. I could get all my money back out (except closing costs) if I did a 80%LTV, however that would be at a 9% interest rate unless I decide to buy down the rate. I would still be positive cash flowing, but just barely. My other option would be to do a 75% LTV at 7.5% interest, but I would have to come up with $20,000 to pay off my HELOC or carry the balance on my HELOC and pay interest on that as well. My goal is to keep this property long term, refinance in maybe 3 years when interest rates have hopefully come down and my property has also increased in value.

Thank you for your help! - Inga

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Phong Bui
  • Rental Property Investor
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Phong Bui
  • Rental Property Investor
Replied Mar 21 2024, 05:23

Without knowing all of your numbers, I would be more inclined to do a 75% refi @ 7.5% and then shovel the cashflow to pay off the HELOC. I don't imagine a variable rate HELOC has an interest that much higher than 7.5% at the moment.

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Remington Lyman#4 New Member Introductions Contributor
  • Real Estate Agent
  • Columbus, OH
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Remington Lyman#4 New Member Introductions Contributor
  • Real Estate Agent
  • Columbus, OH
Replied Mar 21 2024, 06:22
Quote from @Inga Davis:

Hello all,

I bought my first rental property in Columbus OH using the BRRRR method and money from my HELOC on my primary residence. I am now trying todo a cash out refinance to pay off my HELOC so I can repeat the process. I could get all my money back out (except closing costs) if I did a 80%LTV, however that would be at a 9% interest rate unless I decide to buy down the rate. I would still be positive cash flowing, but just barely. My other option would be to do a 75% LTV at 7.5% interest, but I would have to come up with $20,000 to pay off my HELOC or carry the balance on my HELOC and pay interest on that as well. My goal is to keep this property long term, refinance in maybe 3 years when interest rates have hopefully come down and my property has also increased in value.

Thank you for your help! - Inga

No one can predict the future but if your goal is to keep it long term you should try to get the lowest rate possible

  • Real Estate Agent Ohio (#2019003078)

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Steven Goldman
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Steven Goldman
  • Lender
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Replied Mar 21 2024, 06:31
Quote from @Inga Davis:

Hello all,

I bought my first rental property in Columbus OH using the BRRRR method and money from my HELOC on my primary residence. I am now trying todo a cash out refinance to pay off my HELOC so I can repeat the process. I could get all my money back out (except closing costs) if I did a 80%LTV, however that would be at a 9% interest rate unless I decide to buy down the rate. I would still be positive cash flowing, but just barely. My other option would be to do a 75% LTV at 7.5% interest, but I would have to come up with $20,000 to pay off my HELOC or carry the balance on my HELOC and pay interest on that as well. My goal is to keep this property long term, refinance in maybe 3 years when interest rates have hopefully come down and my property has also increased in value.

Thank you for your help! - Inga


Hi Inga, keep in mind many of banks and HMLs have a prepayment penalty for refinancing sooner than 3 to 5 years depending on the program. If you are trying to get as much money out of the BRRRR as possible I would pay the higher rate and ARV. Just check on the prepayment penalty. You can always refinance in 3 years if that is the length of the prepayment penalty. Good luck.

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River Sava#2 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
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River Sava#2 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
  • Lender
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Replied Mar 21 2024, 06:48

Hey Inga - Curious about the 80% LTV for a cash out. Reasin being is that usually lenders will cap at 75% LTV for a cash out refi. Happy to discuss further with you.

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Jake Baker
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Jake Baker
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Replied Mar 21 2024, 11:17

@Inga Davis

Depends on what you plan to do with the extra money you cash out. If you intend to redeploy it immediately then do the 80LTV. If you have no plan to invest again in the near future, buy down the rate.

Regardless, be sure to have enough reserves for monthly expenses and future capital expenditures.

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Inga Davis
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Inga Davis
Replied Mar 21 2024, 11:20

Thank you. I plan to reinvest it to purchase another property right away. I did some more calculations and it seems that I would be able to pay the heloc off  with the extra cash flow if I do the 75%ltv loan at 7.5% interest. Thank you, this discussion thread has helped me think about the loans in a slightly different way and weigh my options better. 

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Jonathan Taylor
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Jonathan Taylor
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Replied Mar 21 2024, 16:53

@Inga Davis lesson to learn for the next BRRRR is 80% cash out is a rare and expensive leverage option. Running exit numbers for 70-75 is the safest bet. To answer your question about which is better, can you pay off the 20k HELOC from the cash flow you make on the property? The 75 LTV at 7.5% is a stronger option as you have more room for cash flow to pay off the HELOC

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Marc Rice
  • Real Estate Agent
  • Columbus, OH
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Marc Rice
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Replied Mar 23 2024, 09:19
Quote from @Inga Davis:

Hello all,

I bought my first rental property in Columbus OH using the BRRRR method and money from my HELOC on my primary residence. I am now trying todo a cash out refinance to pay off my HELOC so I can repeat the process. I could get all my money back out (except closing costs) if I did a 80%LTV, however that would be at a 9% interest rate unless I decide to buy down the rate. I would still be positive cash flowing, but just barely. My other option would be to do a 75% LTV at 7.5% interest, but I would have to come up with $20,000 to pay off my HELOC or carry the balance on my HELOC and pay interest on that as well. My goal is to keep this property long term, refinance in maybe 3 years when interest rates have hopefully come down and my property has also increased in value.

Thank you for your help! - Inga


 What's more important? Getting all your cash out and doing more deals? Or saving $25-50/mo in cash flow?

You need to decide. I think the velocity and momentum of deals is more important. You can always refi the 9% rate in future. Or call more lenders and find a better option. 

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Jacob Sherman
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Jacob Sherman
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Replied Mar 23 2024, 16:39

I would take the 80% and flow until rates drop and refinance . Hold your cash to get into the next deal