Investor · Charlotte, NC · Member since 2017 · 321 posts · 157 votes
Hey. I'm fairly new in the real estate investing. I purchased an investment turnkey duplex property for 95k cash and it appraised for 117k. It's currently being rented. I just learned about the BRRRR technique and I want too move forward with the property I have. I'm looking too refinance the property and start the BRRRR techs. Any suggestion on how to refinance ? & moving forward what type of properties I should look for ? thanks
Northern, CA · Member since 2014 · 674 posts · 444 votes
9y
@Isiah Ferguson tough to do a BRRRR with a turnkey, basically impossible because you are paying near or at retail. There is a ton of info here on BP regarding BP, but the basics are to be be all in with the buy and rehab at ~75% ARV, put a renter in, wait your 6 months if refinancing traditionally (there are other options that cost more) and refinance all your purchase and rehab money out.
I can't imagine the BRRRR working without the first R, which is Rehab, to force some value into the property. That isn't to say it's impossible, just extremely hard to find someone to sell you a property for 70% of value that is in perfect condition.
Hey. I'm fairly new in the real estate investing. I purchased an investment turnkey duplex property for 95k cash and it appraised for 117k. It's currently being rented. I just learned about the BRRRR technique and I want too move forward with the property I have. I'm looking too refinance the property and start the BRRRR techs. Any suggestion on how to refinance ? & moving forward what type of properties I should look for ? thanks
Hello and welcome!
This is a great place to get the help you need with your investing. Good luck with the refinance!
Northern, CA · Member since 2014 · 674 posts · 444 votes
9y
@Isiah Ferguson tough to do a BRRRR with a turnkey, basically impossible because you are paying near or at retail. There is a ton of info here on BP regarding BP, but the basics are to be be all in with the buy and rehab at ~75% ARV, put a renter in, wait your 6 months if refinancing traditionally (there are other options that cost more) and refinance all your purchase and rehab money out.
I can't imagine the BRRRR working without the first R, which is Rehab, to force some value into the property. That isn't to say it's impossible, just extremely hard to find someone to sell you a property for 70% of value that is in perfect condition.
Investor · Charlotte, NC · Member since 2017 · 321 posts · 157 votes
9y
Thank you. That's understandable but being with the circumstance I'm currently in. What do you recommend for me to get started with BRRRR moving forward ?
Northern, CA · Member since 2014 · 674 posts · 444 votes
9y
@Isiah Ferguson it's all about the buy with REI. You have to put the work in to find and buy below market properties. How do you think the turnkey providers make money? They find below market properties, rehab them and sell them to inexperienced investors or investors that don't have the time to do the up front work and just want cash flow. The turnkey provider is taking all the quick and easy profit out of the deal and selling you the long term slow drip profit if there is any.
Put all your focus right now in learning how to find cheap properties. Once you find those, you have multiple exit strategies. With a turnkey, you have almost no exit strategy short term that won't cause you to take a loss on the property.
Investor/RE Broker · Eugene, OR · Member since 2014 · 3k+ posts · 968 votes
9y
@Isiah Ferguson Well it sounds like you do have some equity in the house, and that you got it at 81% ARV, so you could potentially get a conventional loan after 6 months of seasoning at 70-80% LTV, and get most of your money out for the next purchase and rehab. So even though you didn't do a rehab this time, you be set up to do the BRRR next.
Homeowner · Knoxville, TN · Member since 2011 · 207 posts · 73 votes
9y
@Isiah Ferguson I'd shop that rate around brother. 8% seems really steep for a conventional refinance..... I'd be shooting more for 4.5%, tops 5% in today's market. What's your credit look like?
I agree that your rate should be no more than 4.5%, 5% tops. What are some ways you can add value to your current property? Can you raise rents to increase value? or You might have to wait until you have enough equity to refi in this case. But you know that, and are thinking about the next one.
Going forward, you must buy low enough to be able to refinance. Look for properties that you can add value to, also known as "value add" and then get the market rate on those as far as rents. Remember, you don't decide what it'll rent for, the market does.
Brandon Turner just did a BRRRR webinar which is invaluable. I recommend you watch it and take notes. Good luck!!
Homeowner · Knoxville, TN · Member since 2011 · 207 posts · 73 votes
9y
@Isiah Ferguson If anything, it's the credit score that is inflating the interest rate. I'd pull your credit report and figure out what is contributing to the lower score. If it isn't anything crazy (bankruptcy, etc) most of the late payment stuff wipes clean within 2 years. I'd look at trying to get your score up in that 740+ range to take advantage of the best rates.
Also look at credit utilization. If you're maxing a card or two, pay those down, pull again and you'll be surprised at how that improves the score. I pay my credit cards off in full every month, but depending on what I've purchased that month, and when I pull the credit, it can swing my score 20+ points by itself.
Saint Paul, MN · Member since 2017 · 8 posts · 0 votes
9y
@Isiah Ferguson From what Ive gathered, we shouldn't really be looking at turnkeys if we have the time for due diligence. That being said, my cousin does this as he works long hours as a tech guy; hes mostly interested in cash flow. In a case such as this, it would be better to grab private money for the down payment. You'll probably not see cash flow for a while due to paying back the DP, but turnkey is hard to profit from right away. id like to hear some success stories on turnkeys if you end up doing it. And yeah.... 8% hurts.
Northern, CA · Member since 2014 · 674 posts · 444 votes
9y
you can try and develop some relationships with local wholesalers to get cheap properties.
One thing that will kill the BRRRR strategy is refinancing at a cost that kills your cash flow, won't take many of those before you are dead in the water.
The frustrating part of this strategy is the seasoning period if you're able to get rehab done quickly. I've already got a renter in a recent rehab and now I have to wait 3 months. To save time you can start the refinancing process early, it just can't fund until 6 months plus a day. I plan to start at month 4.
Real Estate Agent · Jacksonville, FL · Member since 2015 · 1k+ posts · 1k+ votes
9y
Two kinds of financing are being mixed up. Conventional (fannie / Freedie & FHA) are one type and private, commercial portfolio, hard, etc. is the other type.
Owner occupied Conventional is the best loan you will get. Followed by conventional investor loan. These are great loans if you are starting out. It is impossible to scale using them. Rates in the 4-5% depending on a number of factors. I think it is a max of 10 total loans currently. You will need to personally sign for the loan. Traditionally, they are going to to use a debt to income ratio and discount non W2 income and rental income. If you can meet the debt to income and get to 10 properties, I have respect for you!
In its simplest terms, the non conventional loans are everything else. The deal will stand on its own. The lender is concerned that the property can support itself. Typically they are held in an LLC and are non-recourse. These loans are in 6-10%. There are hybrid loans that may look in part at the borrower and the property and make an assessment on whether or not to write the loan.
The best way to find the loan is to just start calling banks, brokers and other non-conventional lenders. The programs are always changing.
Lender · Western Springs, IL · Member since 2015 · 472 posts · 245 votes
9y
To piggy back on Lesley - starting out your lowest cost, most stable loan programs are going to be your Conventional loan programs. With your credit, specifically Fannie/Freddie.
For your commercial, portfolio, hard money, generally speaking, these are going to be higher rate, shorter term, typically balloon in style, so that you have to redo the mortgage every so often. Again, allowing the creditor to re-analyze how the property is going to stand on its own.
Real Estate Investor · Coopersburg, PA · Member since 2017 · 120 posts · 61 votes
9y
Call your small local banks that keep their loans in-house. Have your list of questions ready and in no time you'll be able to compare many programs and what suits your needs.
Investor · Charlotte, NC · Member since 2017 · 321 posts · 157 votes
9y
Thank you guys. Everyone is appreciated. Okay this is the situation. I know I somewhat didn't approach my first deal correctly buying a turnkey at 81% ARV. Moving forward I found a bank that will refinance based on my credit and assets (the duplex). Both sides of the property are being rented with my gross being $1,200. My business is only 4 months old. The bank is willing too refinance the appraisal value at 70% with 8% interest. Doing the math on a mortgage calculator with P&I and taxes my mortgage payments should be roughly 700$ and cash flow at 500$. This bank specializes in investment properties rental 30 year and fix and flips. How is that a good deal to move forward with the BRRRR concept ? Or maybe I can find a better with a different bank with better rates ?
Your cash flow is not gross income minus mortgage, there are lots more expenses and losses of income than that. And an 8% refinance is a HORRIBLE rate!!!
Lender · Western Springs, IL · Member since 2015 · 472 posts · 245 votes
9y
I think I understand what you are saying now. Your business is too new so you don't have income to qualify off. Other than this property. There are banks that will qualify you by taking your gross rents, depcreciating them by 10% and as long as that covers your PITI payment, they will give you a mortgage. That is more of a non conforming, non-prime type loan so expect higher rates. Is that rate a 30 year fixed? If it is, that may not be that bad.
Jacksonville, FL · Member since 2015 · 8 posts · 1 vote
9y
@Isiah Ferguson: I was just watching BP's path to purchase webinars, and there is a section on Understanding Expenses. Give that a gander to better understand why income minus mortgage does not equal cash flow, as @Greg Leach noted.