Hey guys, I need your help clarifying something. Every time I listen or read something that relates to BRRRR, I see where it essentially says that it can't be accomplished if the original financing is a conventional loan. With that being said, my situation is a little different. Whereas I do have a 20 year loan with a credit union, I didn't have to put anything down and was able to get enough for the rehab as well. I spoke with the lender and was advised that I could refinance the property in a year. With all the details I've given, does it seem as if I can execute BRRRR effectively by doing it this way?
I believe for a conventional the min is 6 months. Your credit Union most likely has a overlay. (That means they have a more strict requirement than the minimum) You could check with more banks. Here's a link to fannie Mae https://selling-guide.fanniemae.com/Selling-Guide/Origination-thru-Closing/Subpart-B2-Eligibility/Chapter-B2-1-Mortgage-Eligibility/Section-B2-1-3-Loan-Purpose/1736853471/B2-1-3-03-Cash-Out-Refinance-Transactions-07-03-2019.htm#Eligibility.20Requirements
Pro tip, and I'm not being a wise ***. Fannie Mae info is very Google friendly. I typed "fannie Mae seasoning requirements" to get this result.
I do this with apartment buildings all the time and have no problem. I will buy it with zero down and finance 100% of the rehab. Then usually within 6-12 months I refi all the costs into a 20 year amortized loan. My original loan to purchase the property is also a 20 year amortized loan and the best rate (about 4.5% at the time of this writing)
@Matt DeBoth Thanks for your reply! I feel a little more at ease knowing that someone else is taking a similar approach to BRRRR investing.
@Joseph Hammel Thank you for your reply!
@Lance Neighbors the reason why investors say you "can't" do BRRRR with conventional lending is because of the traditional 9 month seasoning period. When you take the loan, the lender wants you to hold it for a while before you roll into something new.
Many investors use hard money loans or private to execute the initial transaction because it allows them to refinance with a traditional lender as soon as rehab is complete and leases are in place.
If you're just starting out, you can certainly take the conventional route as long as you're comfortable with your money being in the deal for that long. As long as you don't need it for your own housing and groceries, I think you'll be fine!
Keep us updated on your progress!
@Matt DeBoth as a new investor I have a question. I have the opportunity to purchase a duplex that has been vacant for five years at the cost of $30,000. I have the cash to purchase this property, but don't have the money for the $100,000 in renovations that it will need. Are you saving it is possible to go to a bank for all the renovations and I can get a loan and then refinance when the renovations have been completed? Do they need an appraiser to come out to make sure it will appraise for the amount they are lending me?