BRRRR 101 Question

[Tim Kirk]

At its core, to pull off the best BRRRR possible, is the buyer paying cash for the purchase AND rehab expenses? Renting for a year and then refinancing...

If you traditionally financed the purchase of a BRRRR with the expectations to refinance in 15-18 months, in my mind the refinance/closing costs could make it not worth while, correct?

[Nicholas L.]

@Tim Kirk

a few comments.

1. no, in general you would not rent for a year, and then refinance.  you'd refinance as quickly as possible.  i just did one where i refinanced after 2 months - as soon as the rehab was done.  as @Stacy Raskin mentioned, the longer you wait, the more options you have; but, then you're paying more in holding costs.  you can refinance immediately with a DSCR loan, or after 12 months with a conventional loan.

2. every real estate purchase uses cash... the question is just whose cash.  bank cash is cash, hard money cash is cash, your uncle's cash is cash.  most expensive: hard money cash.  cheapest: your own cash in your checking account.  so this is about the cost of the cash.  i just did a rehab using a 0% credit card.  i don't recommend this to beginners but it worked for me.  cost of putting the rehab on this card: $0.

3. not sure what you mean by refinance / closing costs not being worth it - that's an essential feature of a BRRRR. the longer you wait to refinance the more you're paying in holding costs, not refinance costs. you have to pay refinance costs to refinance.

hope this helps