All Forum Posts by: Adam Gollatz

If you took out a 20 yr mortgage on 145,000 and paid 900 a month, that would work out to be 4.3% I think most people would agree is a great rate to get money at. I would work out the other terms of the deal, mainly, what happens if you want to sell or get out of the contract 3 to 4 years down the road. 

Hi Chris,

Welcome to BP. Im no expert on the entire layout of the forum and there are definitely some overlapping areas but I would say this area isnt wrong. As you post more, you'll get best responses from being in the best suited forum/sub forum.

To answer your question, yes thats the basic concept of how BRRRR works and the deal would make sense, at least to me, assuming you calculated all the costs correctly (purchase, rehab, closing and carrying). You buy a distressed or undervalued property, add value, then refinance it to capture the money you put in (and maybe some profit) then place a tenant to pay the mortgage and cash flow the property. The lending/refinance and structuring the initial purchase has some nuances to it and with lending being a very dynamic field, networking with some lenders in your area will help. I suggested doing some research and reading as many articles as you can. BRRRR is just one tool in the REI toolbox. Check out the Biggerpockets blog posts first in the education tab at the top. Below is an article about BRRRR that you might find interesting, be sure to check out the links in it as well.

https://www.biggerpockets.com/renewsblog/brrrr-buy...

Hope this helps.

-Adam

Hi Erin,

I hate to give the generic answer, but it will depend on the specific situation. Generally speaking, if you borrow 100K (70k for the purchase 30k for repairs/upgrades) what will happen is this: To close they will require proof of 1yr homeowners insurance to be paid, eliminating the need to escrow it because HML are short term solutions they will probably require it to be paid back within a year. At closing, they will give you the 70k you will pay the down payment, any loan points, and the effective daily interest rate for the remaining days left in the month. Youll start rehab and work out the details of the escrow and getting the 30k out. At the end of the month (assuming you pay your interest in arrears) you'll be required to pay the interest on the full 100k, even if the 30k is sitting in escrow still. So if your interest rate is 12% a year, thats 1% a month, or 1000 dollars you'd pay back to the HML. As for the utilities and any other expenses, you would likely have to pay those out of pocket.

I hope that helps. Send me a message if you want to discuss more.

-Adam