BRRRR - Queston on how to do the Refinance
Hello BP! I am about to finish the renovations in a BRRR deal I live in myself. I owner occupy the house (3/1) and do all the work myself. After I am done in a couple months I will have added about 50k of additional equity to the house + cash flow of about $1.5k per month (I added an additional unit to rent out in the back of the main house, I have now a 3/1 as well as a 1/1). My goal is in this case not to take cash out (I bought the house with 5% down and after the refi will have 20% equity in the house) in order to keep my rate low to cash flow when I rent the house as well as the ADU out.
After talking to several lenders I was told that they only refinance with the lower owner occupied interest rate if I stay in the house for another year after the refi. However my intention is to move out and do another BRRRR and do not want to stay a full year.
How can I avoid that 1-Year rule after the refi? I could do the refi as an investment property with a higher interest rate however I would like to avoid this if possible and keep the rate as low as possible.
Thanks for your help! I am located in California.
Philipp
#2 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
- Rental Property Investor
- Boulder, CO
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#2 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
- Rental Property Investor
- Boulder, CO
@Philipp Schwarzbart To the best of my knowledge, there is not a loophole (other than being relocated for a primary job) that would get you out of that 1-year occupancy rule on an owner-occupied loan (these loans are not meant for investors). Otherwise, you are knowingly committing mortgage fraud. I look at using an investor loan or commercial financing as a cost of doing business. Sure it costs a few extra bucks a month, however, my tenant is paying that off for me and I get to stay out of hot water. And here is the kicker you may not be thinking about, I get to use the income generated from the property to qualify for the loan, and if my numbers run properly, I add an asset and income to my balance sheet rather than adding a liability and debt to my balance sheet, thus making me a stronger borrower!
Thank you Whitney! That's pretty much what I thought. I agree, it's not that big of a downfall anyways. I appreciate your help!
