Use private lending for BRRRR with cash purchase or downpayment?

2 Replies

I have access to about $190 000. I was planning to buy in the $150-165 range and use the rest for renos. But recently have been pondering the idea of using the BRRRR strategy with that money as a percentage of a downpayment and aiming for a duplex in the $300-350 range.

In the Kitchener Waterloo area there are literally 4 SFH that I could make offers on under $200 000...I may not be able to increase the value enough to borrow back on the ARV at 80% to cover the initial loan...

What your thoughts...does BRRRR even work if not a cash purchase if using a private lender?

@Jesse Schultz - BRRR on podcasts, and when people talk about it.. I find they over simplify what I think is a relatively complex and difficult to execute strategy. Here's my two cents..

You want to find a lender that understands these kind of renovations or find an investor focused broker. You should get your refi amount based on an ARV before you start construction. Where BRRR falls apart is when you go to refi and you get an appraiser who doesn't know anything, and gives you a low appraisal.

BRRR definitely works leveraged and it's the only way I do it. My next BRRR, I'll be considering a construction loan, so I won't need the cash for the reno. The loan is secured on the ARV.

Lastly, make sure you have a really good contractor. I mean really good. Execution on the reno is the most risky part of BRRR and it's where things fall apart for most.

Hope this helps!

Cheers,

Ming

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