Anazlying a deal using seller finance

4 Replies

Is it possible doing the BRRRR strategy without an all cash offer?

I'm currently looking at a duplex in a college town. The asking price is 160K and it has been on the market for 1 year. The property looks like it would appraise around 185K. The owner is offering seller financing. Has anyone ran into the situation where the go through with seller financing and the refinance into a 30 year loan with a bank? Is it possible to do a cash out refinance? Almost as if it were a BRRRR property?

Hi @Christian Thompson , it is absolutely possible to BRRRR without buying with using all-cash.

With seller financing, though it is not coming from a bank and no money is changing hands at first, it is debt all the same. As long as the debt is recorded properly (which a title company or RE attorney can help with) then the debt will be "on the books" and the lender, upon refinance, will look to pay that debt off before they hand any cash your way.

Caveat here: unless the property is being sold FSBO and has horrid pictures and a few other things going wrong with it then it is unlikely that it would appraise for $185k. I can say that definitely based on the preceding statement of "The asking price is 160K and it has been on the market for 1 year.". The market is too efficient to let that happen unless there is more to the story. So, all that to say: caveat emptor

The way you initially purchase a property has no effect on the BRRR method (Buy renovate rent refinance) Buy the deal how ever you can as long as its a good deal. Make sure there is no prepayment penalty in the seller financing note so you can refinance in 6 months to a year after the property has seasoned for a traditional lender.

@Will Fraser Thank you! When do you find it worth it to buy a BRRRR without using all cash? Can you give an example? Would seller financing really be the only way to do this? As far as I know a bank won't lend to a property that is in bad shape. So, would you really need to find a property that is just outdated and needs cosmetic updates in order to get a loan from the bank and based of your numbers when analyzing the deal it would have to be substantially under market value?