BRRRR Refinance Question

4 Replies

I'm in the middle of reading the BRRRR back and have been listening to all the podcasts and studying. what have you found to be the most effective way to do a cash out refi on a property that was bought with cash before the SIX month seasoning period for conventional loans?

@Chris Conroy the concept here is two fold:

  1. You should NEVER use personal funds to purchase business assets.  This would be "comingling funds" and create a link between your business operations and your personal assets.  If your business were ever sued...then there would be a clear linkage between your business and your person.  That means you would directly be tied to any lawsuits.  Keeping your business and personal funds seperate is a pretty important action
  2. "Borrowing" from your Business - If you use proper accounting measures to keep your business and personal funds seperate then you can show that you "borrowed" the same "cash funds" you used to purchase a property.  You gave your company a cash injection - then your company granted you a loan.  This fits into the Fannie/Freddie rules of lending and having NO seasoning requirements. All you have to do is show the proper paperwork...then you get a lower rate, no seasoning and can go up to 85%.

Essentially, you "borrowed" the money from yourself in the first place...you probably just never thought of it like that before.  Doing so helps provide better asset protection and provides better loans.  It's a win win!  Hope all of that makes sense. 

@Chris Conroy I would not pay cash for purchase/rehab and would instead take out a fix n flip loan which would most likely require 10% down of Total Costs (purchase price + rehab budget). Fix n Flip loan would finance purchase and give you credit line for the rehab (works on reimbursement draws as you complete work). At 90 days (if rehab is complete) you can refinance into long term rental loan with private lender. You will be paying 2 sets of closing costs (new investors will prob be minimum of $3k origination for the fix n flip & $1750 origination for the rental loan) but tying up your $ in the purchase & rehab is not the way to go in my opinion. Keep your cash on hand to possibly do multiple deals at once.