One thing I think newer BRRRR investors should pay more attention to
The refinance needs to be thought through before buying the property, not after the rehab is done.
A lot of people analyze:
Purchase price
Rehab budget
ARV
Expected rent
But the part that can make or break the deal is whether the completed property will actually support the refinance.
A few questions I’d want answered upfront:
What will the property realistically appraise for after repairs?
What rent can it support based on real comps?
What will taxes and insurance look like after the project?
Will the property cash flow after the new loan payment?
How much cash will actually be left in the deal after the refi?
The purchase can look great on paper, but if the rental income doesn’t support the exit loan, you could end up stuck with more cash trapped in the deal than expected.
For the investors doing BRRRRs right now, are you underwriting the refinance before you buy, or are you mainly focused on getting through the rehab first?
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#3 Real Estate Deal Analysis & Advice Contributor
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#3 Real Estate Deal Analysis & Advice Contributor
- Lender
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You point out a major blindspot most BRRRR investors have which is what does that exit refinance ACTUALLY look like. I'm a BRRRR investor myself and that's why I built this cool customer facing software that borrowers can use to analyze a BRRRR exit and get REAL rates/terms/fees with just a few simple inputs like Value, Rent, Taxes, Insurance, and FICO. The best part is they can play around with this without even providing a name, number, or email address and you can check it out anytime on the website link in my signature below.
- Alex Bekeza
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