Should I refi my house to BRRR a second property?
Member since 2025 · 1 post · 1 vote
- I am a 30 year old home owner in the dallas area (Fate) and I'm wanting to start my first BRRR. I am a small business owner in the outdoor living industry and have a working knowledge of construction.
I have refinanced my loan to a 15 year with 2.6% interest I owe 188k and market value of my home is around 355k.
I have thought about doing a cash out refi to obtain the capital to purchase a second property for the BRRR process. My great is that sacrificing my rate and terms on my mortgage could be a mistake. On the other hand, it may take me 18 months or so to raise a similar amount of capital.
My estimated mortgage if I were to refinance my current home would still be several hundred dollars below rental value
You’re sitting on a goldmine with that 2.6% mortgage. I’d caution against refinancing out of that unless it’s absolutely necessary.
Instead, I’d recommend looking into a HELOC (Home Equity Line of Credit). It allows you to tap into your equity without touching that first mortgage. You can borrow what you need, only pay interest on the amount used, and potentially recycle that capital once you refinance the BRRRR.
Tough one. My gut feeling is wait. You're interest probably goes from crazy low to 7-8% plus you will have closing costs on the current home if you refi.
News keeps saying government wants to push down interest rates. Who knows if and when that will happen. My quick math on your current deal says you would need to cash flow $1000 net of taxes to make this make sense. Of course lots of moving parts. What would your rent be, how much you borrow, new interest rate.
I'm thinking you should not give up your current rate.
Could you get a roommate or two today to raise more cash?
Could you rent your current and live someplace cheap for six-12 months and get the same results vs 18months?
Also if you are in an HOA, check to see what their rental restrictions are.
I'm in a similar situation as you with our primary and th equity in it. I've been planning to use a HELOC so we can keep our low interest rate and if you're confident you can pull off the brrrr (I'm not sold I can yet) then use that and when you refinance you pay off the HELOC balance. I'm back and forth between attempting brrrr and just saving up as much as we can for a downpayment and using our heloc to top the rest off. Curious what you decide to do though and good luck with it.
- I am a 30 year old home owner in the dallas area (Fate) and I'm wanting to start my first BRRR. I am a small business owner in the outdoor living industry and have a working knowledge of construction.
I have refinanced my loan to a 15 year with 2.6% interest I owe 188k and market value of my home is around 355k.
I have thought about doing a cash out refi to obtain the capital to purchase a second property for the BRRR process. My great is that sacrificing my rate and terms on my mortgage could be a mistake. On the other hand, it may take me 18 months or so to raise a similar amount of capital.
My estimated mortgage if I were to refinance my current home would still be several hundred dollars below rental value
@Reed Andrews Perhaps you should connect with @Kelli Wilson!
You’re sitting on a goldmine with that 2.6% mortgage. I’d caution against refinancing out of that unless it’s absolutely necessary.
Instead, I’d recommend looking into a HELOC (Home Equity Line of Credit). It allows you to tap into your equity without touching that first mortgage. You can borrow what you need, only pay interest on the amount used, and potentially recycle that capital once you refinance the BRRRR.
Hi Reed,
A HELOAN or HELOC may be a better option to keep that 2.6% in the first position. Also, if you are getting into BRRRRs, there are financing options that allow you to put as little as 10% down on the purchase so you don't need the full cash purchase liquid in your account.
My advice, no. You probably got equity in there to pull out on a down payment, but I would not touch that mortgage on your primary. That is where you live. You want that paid off.
Instead, as someone suggested above, look into a HELOAN or a HELOC. I would only pull for the primary. You are probably going to be stuck at 80%LTV on the purchase of the BRRR property since it is your first time. I will include a list of things you will need to hit to finance the 2nd leg of your BRRR strategy. Below. However, you are going to want to pull DP, CC, and Reserves from primary, then down payment on Purchase and Renovation, plus able to reflect reserves. Also since you are a first timer, you might be stuck to an 75-80 LTC(Loan to Construction). Then of course if you have the capital to execute it, you would go with the regular BRRR route, and instead of pocketing the cash, pay down or eliminate the 2nd lien on the primary.
This means you need to get a decent deal to pay you back, and leave you enough room on the investment for 80-85 LTV after you roll the Fix and Flip loan.
Now, a word of caution to you, the housing market through out the southbelt is funky right now, and could see corrections coming. If it was me, and I was dead set on entering this market currently, I would be sticking and moving, doing flips with small reno budgets, with room in ARV to fight a declining market. Staying in the 3-4 month range at most. However, understand, 25k can get wiped in about 2 months time. At least that is currently here in the Tampa area.
Here is the two step guidelines.
Ideal for: Buyers renovating and reselling for profit
Ideal for: Long-term hold investors seeking monthly cash flow
Buyer has cash for down payment and reserves
I in no way advise this, but you can get a second position on the house up to 65% of the ARV
ao you'd get 65%(ARV) - Current Lien in a loan. So that is $42,750 in a second mortgage without breaking the 2.6% you have.
But if this is cash flowing that nice...is the risk vs the reward here?
I wouldn't. I'd stay as is and find another way to raise capital.