Im analyzing my first BRRRR property,figured out my ARV range, and ive noticed that in order to pull ALL of our money out during the Refi stage, we have to make really, really low offers.
Im just wondering what percentage range some of you successful guys (and ladies) are comfortable leaving in a deal so that I can offer something more appealing to lock a property up.
I think you have to make that determination yourself. Anyone else's financial situation and real estate portfolio are going to be very different from yours. Just because we leave X% or Y$ in a deal doesn't mean that would make any sense for you.
I give you kudos though for figuring out how aggressive you have to be for a BRRRR to work. It's very, very difficult to find them right now, even off market. There is such demand for BRRRR-able inventory that it's resulted in 'bidding wars' among investors just like for on-market properties.
I think you have to make that determination yourself. Anyone else's financial situation and real estate portfolio are going to be very different from yours. Just because we leave X% or Y$ in a deal doesn't mean that would make any sense for you.
I give you kudos though for figuring out how aggressive you have to be for a BRRRR to work. It's very, very difficult to find them right now, even off market. There is such demand for BRRRR-able inventory that it's resulted in 'bidding wars' among investors just like for on-market properties.
Investor · Madison WI · Member since 2021 · 140 posts · 103 votes
1y
Depends on your goals. I typically have a 5 year hold timeline, so I'm not looking to get 100% out. I also prioritize cashflow, which requires leaving some money in the property right now. For me, it's a balance of a safe LTV and a worthwhile cash on cash return. Up until this point, I've been able to pull 2nd positions or helocs on an existing property for the downpayment, intially pay cash for the renovations, then refinance or 2nd position after renovation to get the renovation money back out. So the down payment in this case stays as equity in the property. The current interest rate market and lack of inventory has slowed this process down significantly.
Realtor · Raleigh NC and Greensboro, NC · Member since 2019 · 391 posts · 392 votes
1y
10%-12% is the limit in our conversative underwriting case. Everything can always change in application (reno, rent amount, interest rate, ARV). We've generally been leaving 0% - 8% in the deal over the last 2 years.
I think it depends on your goals. If you’re trying to scale fast and recycle cash, leaving 5 to 10 percent in can still be a win if the cash flow holds up. For me, if the property is in a solid area and the rents are strong, I’m okay leaving a little in to lock in a good long-term hold.
Lender · Los Angeles, CA · Member since 2022 · 967 posts · 445 votes
1y
Hi Jesse,
Every investor is different but in my view only looking at deals that you can pull 100% out is difficult in this market and potential significantly delay (or even deter) from doing your first deal. I do many refinances for BRRRR investors day to day and I'd say majority of those refinances do not take out 100% of what they put in.
Lender · Winter Park, FL · Member since 2021 · 737 posts · 412 votes
1y
Lenders typically max out at 75% (some up to 80%) of appraised value on a cash out refinances and Debt Service needs to be at least at 1.0. If you are good at comping values and rents you can simply work the math backwards based on what your lender is telling you your rate would be at 75%.