Should I refi my house to BRRR a second property?

Question

- 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

Tyler Hodgson · Answer

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.

Mike Klarman · Answer

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.

Brett Chandler · Answer

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.

🔹 1. Fix & Flip Loan

Ideal for: Buyers renovating and reselling for profit

Minimum Guidelines

• FICO Score: 620+ minimum (700+ preferred for best terms)
• Down Payment: 10%–20% of purchase price (based on experience)
• Experience:0–1 flip in last 2 years = higher rates, lower leverage2+ flips = better terms (LTV, LTC, LTARV, rate)Special consideration for General Contractors
• 0–1 flip in last 2 years = higher rates, lower leverage
• 2+ flips = better terms (LTV, LTC, LTARV, rate)
• Special consideration for General Contractors
• Liquidity Requirements:Must show funds for down payment, closing costs, and reservesReserves typically 3–6 months of payments depending on experience
• Must show funds for down payment, closing costs, and reserves
• Reserves typically 3–6 months of payments depending on experience
• Loan Term: 12 months interest-only (extensions possible)
• Rehab Scope: Detailed Scope of Work (SOW) required before application
• Exit Plan: Must clearly outline exit strategy
• Character: No recent criminal history involving moral turpitude

• 0–1 flip in last 2 years = higher rates, lower leverage
• 2+ flips = better terms (LTV, LTC, LTARV, rate)
• Special consideration for General Contractors

• Must show funds for down payment, closing costs, and reserves
• Reserves typically 3–6 months of payments depending on experience

Entity Requirements

• If closing in an LLC:Must provide Articles of Incorporation, Certificate of Good Standing, EIN Letter, and Operating Agreement (or Corp Charter if not an LLC)
• Must provide Articles of Incorporation, Certificate of Good Standing, EIN Letter, and Operating Agreement (or Corp Charter if not an LLC)
• Must prove experience via HUDs or LLC membership tied to past deals

• Must provide Articles of Incorporation, Certificate of Good Standing, EIN Letter, and Operating Agreement (or Corp Charter if not an LLC)

Funding Speed

• 4–10 business days with clear title and insurance

✅ Best Fit

• Buyer has cash for down payment and reserves
• Property needs rehab
• Quick closing required

🔹 2. Rental Loan (DSCR / No-Income)

Ideal for: Long-term hold investors seeking monthly cash flow

Minimum Guidelines

• FICO Score: 660+ (680+ preferred)
• Down Payment: 10%–25%DSCR < 1.0 may require higher down payment
• DSCR < 1.0 may require higher down payment
• DSCR:Standard: 1.00+Acceptable as low as 0.75 with compensating factors
• Standard: 1.00+
• Acceptable as low as 0.75 with compensating factors
• Docs Required:No personal income verificationLease agreement or 1007 rent schedule acceptable — no tenant required
• No personal income verification
• Lease agreement or 1007 rent schedule acceptable — no tenant required
• Property Types:SFR, 2–8 Units, Condo, Townhouse
• SFR, 2–8 Units, Condo, Townhouse
• Loan Term:30-year fixed (interest-only and ARM options available)
• 30-year fixed (interest-only and ARM options available)

• DSCR < 1.0 may require higher down payment

• Standard: 1.00+
• Acceptable as low as 0.75 with compensating factors

• No personal income verification
• Lease agreement or 1007 rent schedule acceptable — no tenant required

• SFR, 2–8 Units, Condo, Townhouse

• 30-year fixed (interest-only and ARM options available)

✅ Best Fit

• Buy-and-hold investors
• Property is rent-ready or has strong rental comps

Buyer has cash for down payment and reserves

Ko Kashiwagi · Answer

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.

Jaycee Greene · Answer

@Reed Andrews Perhaps you should connect with @Kelli Wilson!

William Breymann · Answer

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.

Bruce Lynn · Answer

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.

Should I refi my house to BRRR a second property?

Most Popular Reply