BRRRR- how much do I take out?

Question

Ok I just wrapped up my first BRRRR. Here is a little of my backstory. My wife and I inherited her fathers house and started renting it out to her brother in 2020. We owed nothing on it. Fast forward to June 2024 and her brother says he is moving out. My wife and I know that the house needs a complete remodel and it would be the perfect time to do it. At the same time I came across a off market 4 plex my neighbor was selling. This also needed a complete remodel. We complete the remodel of the house in two months and get a renter in place at $2790 a month. We paid for the 50k remodel out of pocket. After rehab and renter in place we refi for 325k. The house appraised at 500k. The 4 plex was purchased with hard money and I was going to fund the rehab with my 136k heloc on my primary. After the refi on the house we paid the heloc off and paid down the hard money loan. fast forward to today and I am trying to refi the 4 plex. Each unit will rent out for $1150 ($4,600 fully occupied). We currently have two tenants in place and one moving in April 1st. We owe about 180k on the hard money loan and 9k left on my heloc. I would value the 4 plex at 650k. My question is how much do I pull out. If I refi at 220k that would pay everything off and put about 30k in my pocket. I would cash flow about $2,700 a month from all my properties. I could also refi at 330k put 130k in my pocket and cash flow 2k a month.. with a 100k extra I can do more deals but dont want to just scale. I love cash flow. Or I could refi at 70% and put 260k in my pocket but this would wipe out my cash flow. Actually would give me 1k but that is not factoring in cap ex and vacancy. Any advice would be greatly appreciated.

Jay Hurst · Answer

@Richard Pastor Can you clarify how long you have owned the 4 unit? That will effect your potential options.

Richard Pastor · Answer

@Frank Pyle Basically all of that. I don't want to over leverage myself. I have solid cash flow. I don't want to pull to much out because I don't have any deals lined up. I would like to scale but only if I gain more cash flow. You cant really do that here in Oregon. I don't want to let all that equity sit there either. So maximizing cash flow while pulling some equity out would be great but how much do I pull out?

Frank Pyle · Answer

could you clarify what kind of advice you’re looking for? Are you more interested in:

• Maximizing cash flow while still pulling some equity?

• Leveraging funds for future deals while maintaining a solid cash cushion?

• Understanding the long-term financial impact of different refinancing strategies?

Jason Wray · Answer

Richard,

What program are you going to use DSCR, or traditional Fannie/Conventional? Reason I ask is in a typical REI world if you plan to grow and buy more properties take out the extra cash so you can pay off the Heloc, Hard Money and enough to put down on 1-2 more properties and some extra cash to tuck away for renovations to avoid another loan to increase the ARV's.

Why stop now after the success you have had this far sounds like you know what you are doing. DSCR offers some good options for this on a COR you can select a 40 Year with the first 10 years fixed as an I/O interest only. That way the payment is minimal it increases the cash flow and you can take out more versus standard PITI option. You an also select a prepay if your not going to pull cash out for a while you can take a 1-2-3 YR prepay and get a rate reduction of .75% in most cases.

If you ever have any questions feel free to reach out or send me an email I enjoy helping other BP members.

Richard Pastor · Answer

@Jason Wray I am going the DSCR route. I didn't know about the 40 year term so I asked my lender and they do offer it. Thanks for the tip. looks like it would drop my payment $250 bucks. I am looking out of state right now to find more properties. In the Midwest I can put 20 percent down and cash flow so may do that.

BRRRR- how much do I take out?

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