BRRRR deal advice using hard money

4 Replies

Hello everyone, I'm a new investor based out of Puyallup WA. I would like to see if I can get some advice on a BRRRR deal I will be closing on soon. Here are the numbers:

Purchase price: $350k

Rehab cost (2009 build, 1300 sq ft, cosmetic rehab only): $20k 

HM lender costs (points and interest, holding 1-2 months): Roughly $10k 

Refinance costs: roughly $10k 

Total cost: $390k. 

ARV: $430k - $450k.

So my 2 exit strategies are either flip with a profit of $50k-$70k, or refi into a rental. Already have an investor friendly lender that can do 75% and 80% LTV (with slightly higher rate).

My mortgage lender said I can only refi and pay off the HM loan itself but I cannot get my 10% HM down payment out because thats considered a cash out and you have to wait 6 months to pull cash out plus a $4k refi cost again. Even if at 75-80% LTV, I can pay off the hard money AND pull out my down payment, its not allowed.

So my questions are, how do the numbers look and did i miss anything? 

At 80% LTV I can pay the HM loan completely and just be in with my 10% HM down payment.

Is this what everyone does with their hard money BRRRR deals? Leave their HM down payment in the deal and refi a second time later on to recoup their HM down payment?

Thanks! And if anyone needs recommendation in WA for hard money lender, investor friendly mortgage lender, or real estate agent, I can provide. 

@David Shamataylo

Would this cash flow once the property is refinanced? What are market rents there? If it’s not going to be cash flowing an is going to be losing money every month I’d caution, but I’m also from the Midwest where I like cash flow and appreciation.

So if it won’t cash flow after refi then I’d lean towards selling it in my opinion.

Hi Marc, oh yes it’ll cash flow about $400 a month. So even if I have to leave the $35k hard money down payment in the deal, that’s still a 14% COC return so pretty good.  Just wondering what everyone does in terms off pulling out their hard money down payment. 


Originally posted by @Marc Rice :

@David Shamataylo

Would this cash flow once the property is refinanced? What are market rents there? If it’s not going to be cash flowing an is going to be losing money every month I’d caution, but I’m also from the Midwest where I like cash flow and appreciation.

So if it won’t cash flow after refi then I’d lean towards selling it in my opinion.

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As a first flip, I would suggest making sure you have a plan B. Ideally that is being able to rent it out with some amount of cashflow in the event of a market change or unexpected situation. $20k rehab doesnt seem like much. You doing all the work? What is the scope? 

Yes my two plans are selling for 40k profit or rent with a decent cashflow (but as of right now i would have 10% or $40k locked into the deal if i rent)
Its a 2009 1300 sq ft that only needs interior paint, kitchen paint, and fixtures. Hiring that part out and im installing bathroom vanities myself. 
So from what I understand, with most lenders there is a 6 months cash out seasoning period. What if I took out a fixed rate HELOC or equity line immediately after the refinance to get back my 10% hard money cash downpayment? I don't believe those require a seasoning period and those are usually 90% LTV I believe. As long as its a fixed rate, any harm in doing that to get all the money out? (as long as it still cash flows). 


Originally posted by @Jake DeAtley :

As a first flip, I would suggest making sure you have a plan B. Ideally that is being able to rent it out with some amount of cashflow in the event of a market change or unexpected situation. $20k rehab doesnt seem like much. You doing all the work? What is the scope?