I'm not sure how to proceed?

[Josue Guerrero]

I was doing a little bit of reading up on the BRRR strategy blog post by Brandon Turner here on BiggerPockets. I'm slightly confused on the refinancing aspect of the strategy. I'll use his example to demonstrate:

Let's assume we got a hard money loan from a financial company for a home with an ARV of $150,000. Using the 70% rule, we purchased it for $75,000 and incurred $30,000 in repair costs getting our total investment to $105,000.

Now my question is this: a hard money lender is going to charge you interest and loan points. Let's assume its an 10% interest rate, with 3 loan points on it and the lender wants the money back in 90 days. How exactly do you go about the refinancing of this property through a conventional lender in a step by step process, assuming you refinance at a 70% LTV ratio?

[Brie Schmidt]

@Josue Guerrero Most conventional lenders require 6 months of seasoning, so you would only be able to refi after that. So make sure the HML is aware of that upfront and the terms you negotiate cover that.

So you would meet with a conventional lender before you offer on anything, and get a preapproval.  Make sure you understand your approval limit, what factors increase or decrease your approval (incurring new debt, buying a house with rental income, ect)

Once you are comfortable that you would get approved for the refi down the road, then you can start looking at properties to buy with a HML. Once a property fits your criteria, you rehab it and then after 6 months apply for a conventional loan to pay off the HML.