All Forum Posts by: Aliyyah Carter

Completely depends on what areas you are working with. Personally, I like the lighter flips as you can get in and out, less risk involved, less hold time on your money, less time for the market to shift, etc. Quicker I can get in and out, the less risky it is! But light ones are hard to come by because that is what everyone can do.

If I'm going to sink time and money into a full gut, I want to make sure its for a good return! Where in the Philly area are you working in? 

I'd say it's all about the amount of capital you have available, and the team behind you doing the work/ your own ability to complete rehabs. The profitability of a full gut job is astronomically higher if you get the property for the right price and handle a lot of the work yourself, vs paying close to full value and doing minimal upgrades.

I hear Philly is still in person, but the suburbs is on bid4assetts 

The primary advantage of the BRRRR method is the ability to extract your initial cash investment, keeping your investment cycle active. However, current challenges with this strategy mainly revolve around interest rates. Traditional loans now demand 12 months of seasoning, meaning you might need to extend your 12-month bridge loan with your Hard Money Lender (HML), typically incurring a minimum fee of 1%.

Most investors look to refinance using a DSCR loan. While lenders usually require 6 months of seasoning, some are flexible with no seasoning, provided you have proof of completed rehab. The maximum Loan to Value (LTV) for cash-out with most lenders is 75%, though some still offer up to 80%. Investors often need to refinance at 75% to 80% LTV to retrieve their entire initial investment, but remember, DSCR rates hinge on LTV and credit score. Picture an X and Y axis on a graph: as LTV rises, so does the interest rate, making it harder to qualify for DSCR and reducing monthly cash flow from the property.

Lenders are currently introducing no-DSCR options, which tend to be riskier for both the investor and lender; most still prefer seeing DSCR ratios between 1.0 and 1.1. Given these conditions, our buy-and-hold investors are increasingly incorporating fix-and-flip or wholesale projects. This approach helps avoid cash-out requirements at the time of refinancing and even enables buying down rates to maximize monthly income.

BRRRR is really hard right now because with rates where they're at and prices more or less flat, it's very hard to hit that 1.2 DSCR that banks want without having to bring a substantial amount of your own cash to close. In other words, your LTV will likely be substantially below 75%.

Right now, the best plays for investors are equity deals (assuming they have cash) or house hacking IMO. 

Hey @Aliyyah Carter! Your client could also look into getting a DSCR loan with a hard money lender. When doing these loans, I can qualify the property for certain LTVs based on its income and expenses. So as long as your client's property cash flows, there should be no problem with her concerns about being self-employed.

I hope this helps!

Hey Aliyyah - some advice directly for your client is have her engage a few lenders and explain her situation to them. They should be able to give her an idea of what her terms will look like for the refinance. Maybe engaging them early and letting the lender take a look at her info/situation would ease some of her worries.

More specially to BRRRR, there are a few pros/cons. I think the obvious pro is the ability to get into a rental property with little to no money invested (although unlikely nowadays). Some cons or risks rather would be: 1. Unexpected rehab costs causing budget to go over, 2. Appraisal value is less than expected, 3. Waiting the seasoning period in order to refinance allows rates to fluctuate (a con in today's environment since they have been increasing seemingly everyday)

There is a lot to learn with BRRRR and surely a ton to love and to be weary about.