All Forum Posts by: Brian Larson

Originally posted by @Brian Garrett:

@Brian Larson Would you mind sharing your BRRRR calculator? Would love to compare it to the BP one and analyze deals on each of them to "double check" my numbers.

 Sure, you can find it here

https://www.biggerpockets.com/files/user/peeklay/file/brrr-calculator-13

there are many reasons private money lenders don't like owner occupied (lending restrictions and regulations, possible foreclosure in the future just feels nastier than taking an investment back, not underwitten as investment, etc)

Yes, #4 was intended to have a lien against your original home and you  can still rent it

hi @Jamie Rudder first, I love that you are looking to keep your existing home and rent it out. smart play. unfortunately I personally would not lend on this and you might run into some snags along the way. I may have missed a detail or two but hear me out. 1. many investors/lenders shy away from personal residence and also do not like being in second position. I am definitely not saying all, just many that I know. 2. the rate if return is low for a 2nd position 3. the way this reads, it sounds like this is essentially a loan to get you the down payment money you don't have. that will be a problem for your lender (they want you to have skin in the game) and it is likely an issue for this private lender (again, in this situation you don't have skin in the game) 4. you may find someone that would cross collateralize your first property (essentially take a second on it homes) so that might be something to think about. 5. and last thing, I promise:) have you thought about borrowing from a family member? that could get you over the hurdle of 'proving out the deal' but again your lender still won't like this. sorry to be a downer but that's how I interpret the deal and problems you may face good luck!

@Mike Ojo agreed with the above and wanted to add a few things. 1. you should be able to make the deal CF even in phase one if you have an interest only loan and don't pay too many points. listen to the podcast with the Syrios brothers (not sure on #, sorry) for more details on how they are doing this at scale. private money also allows a rate/term refi to shorten that refi seasoning window (i.e. none!) 2. I have a ton of variable inputs you must consider AND the key metrics/kpi's that output and help me make my decisions on deals in a calculator I built. if you want to DL it and check out my calc just hit my fileplace or search brrr in fileplace and you'll see it under files. Not to get too high and mighty but I built this calculator before BP had one and I think it is much more flexible and gives more data back. I have literally used it over a hundred times to analyze deals. I hope this helps

sorry, it's cash out refi. typing on phone.... apologize on formatting as well.

glad you are getting started but to be honest, this won't work for BRRR (as you have it laid out). hear me out on why. 1. you don't have the spread needed in order to get your money back. assuming $130k appraised value and you can refi with 80% ltv, well that is $104k ALL IN. you are purchasing over that without rehab and holding costs included 2. brrrr doesn't generally work if you start off with the property financed conventionally in step 1. reason being that they will consider it a cash out redo (your purchase was locked in day 1 with purchase) these numbers don't fit the model (not a big enough discount on price to include rehab under 80% ltv) so I would pass on it. also, I would consider finding HML or private money so you can get the purchase and rehab toed up under ltv limits and then redo. sorry to be a downer

Depends on your strategy. Looking for cashflow? Appreciation? Want to flip a place and make $ now? Also depends on what you mean by $100k. Do you have $100k in cash or can get a loan for $100k and have less capital that you will use as DP?

Originally posted by @Brian Garrett:

Originally posted by @Brian Larson:

Originally posted by @Brian Garrett:

Originally posted by @Brian Larson:

Originally posted by @Brian Garrett:

Originally posted by @Brian Larson:

Originally posted by @Lee S.:

Originally posted by @Alvin Pereira:

An alternative approach to avoid playing the market down the road (6-12 mos) is to use private lending that's not contingent on a prepayment penalty. You could use private lending for your acquisition+rehab and quite literally turn right back around and put a traditional mortgage (refi) on it. 

So private money funds it (no prepayment penalty is key), you get all your financial ducks in a row needed to reach the final steps of the mortgage process. Once you're done getting the property up to speed, flip the switch from private to mortgaged. If your financials have been thoroughly vetted, this should give you enough back that you can pay off your private lender, keep a bit of cash for yourself, and essentially "refi" the property at any time without restrictions.

 you are describing the delayed financing which I agree is an option.  I've used private lenders on the first couple I've done, no prepayment.  The big issue I see with delayed financing is the extra set of closing costs, not a deal killer but I would prefer to avoid it when possible.  Just to be clear for those that don't understand, you would need to refinance once to pay off your private lender or get your own purchase cash out of the house immediately, then refinance again after 6 months with a new appraisal to get your rehab money out.

I've learned that you can start your refinance early, I started my latest one at month 4.  Doing it this way allows the refinance to close at 6 months and a day, rather than starting the process at 6 months.  Doing it this way makes doing a delayed finance and then a refinance less desirable in comparison.

Lee, that is not how my lender has seen my deals. Here is what I have done:

 - Buy with my own cash, rehab with my own cash

 - Get a private note to cover both (either do this day 1 or after I have rehab done)

 - perform a Rate & Term Refi on the private note with my conventional refi

In this model I was able to get ALL of my money back and I did it around the 6 month mark on each.

I see your details and agree totally with what you have written but I think the key is to Rate & Term refi.

thanks

b

 What do you mean by get a private note after you buy and rehab with your own cash?

I have built up a network of private lenders (friends, family, other) that can make 7% interest only loans for 1 yr. I setup the note tied to the property and then am able to take on more deals at one time.

Its hard money lender without the orig fees/rates and terms they set. Essentially this network of people trust my process and have told friends they are getting 7% return on their money so I have people just waiting to fund deals. I generally repay the note within a year but have it the full time just in case.

 So then you aren't buying and rehabbing with your "own cash" like you originally said.

uh, ok, yes I am. Let me be clearer.

Here the general steps I take.

1. Buy the house with my own cash

2. Begin rehab with my own cash

3. I look for private money to assume the full amount of Purchase+Rehab in a new private money note

4. Work with a bank (last year I used conventional, this year I have to go portfolio/specialized since I have too many loans) to then Rate&Term ReFi out of the private money into a conventional loan.

The money comes in stages. First I use my "own cash" then I use private money then I use a bank

make sense?

I get what you're saying but I don't understand the purpose of step 3. Why not just cash out refinance after you buy it and rehab it with your own cash? This way you get your cash back out and you move it into your next property? What am I missing here? Why someone in the middle?

The purpose is to meet conventional lending standards. They have seasoning for cash out refinancing but not for Rate & Term refi's

Also, as you do this and you get more deals going simultaneously, you can have a network for private money to leverage so you can do more than 1 deal at a time (or however many you can cover with your own $).

The two downsides of BRRRR is timing(always seems to take longer on some part of the process, closing, rehab, refi) and having to play by a lenders rules (including appraisals which can be its own beast but I think I have figured that out).

As someone stated above, with a commercial loan you wouldn't have to do all of this extra work. Of course you likely wont have a sweet 30yr, 4.5% interest loan either.

Originally posted by @Brian Garrett:

@Pete Perez How does that work with the BRRRR strategy if I can't get my initial investment money back out? The whole purpose of the strategy is to take your initial cash back out and roll it right over into the next property and repeat the process ultimately allowing you to grow and scale your portfolio. This method you're mentioning would not allow that to happen.

Brian, find some private money to borrow for a few months and put a note against the property. You can then Rate & Term Refi. You seem to be hung up on the 'my money back' part. Just get your money back one step earlier than normal (i.e. you get your money back from the private lender then you pay them back once you have the traditional lender in place).

see my notes above. I get my initial cash back early and often.

Originally posted by @Brian Garrett:

Originally posted by @Brian Larson:

Originally posted by @Brian Garrett:

Originally posted by @Brian Larson:

Originally posted by @Lee S.:

Originally posted by @Alvin Pereira:

An alternative approach to avoid playing the market down the road (6-12 mos) is to use private lending that's not contingent on a prepayment penalty. You could use private lending for your acquisition+rehab and quite literally turn right back around and put a traditional mortgage (refi) on it. 

So private money funds it (no prepayment penalty is key), you get all your financial ducks in a row needed to reach the final steps of the mortgage process. Once you're done getting the property up to speed, flip the switch from private to mortgaged. If your financials have been thoroughly vetted, this should give you enough back that you can pay off your private lender, keep a bit of cash for yourself, and essentially "refi" the property at any time without restrictions.

 you are describing the delayed financing which I agree is an option.  I've used private lenders on the first couple I've done, no prepayment.  The big issue I see with delayed financing is the extra set of closing costs, not a deal killer but I would prefer to avoid it when possible.  Just to be clear for those that don't understand, you would need to refinance once to pay off your private lender or get your own purchase cash out of the house immediately, then refinance again after 6 months with a new appraisal to get your rehab money out.

I've learned that you can start your refinance early, I started my latest one at month 4.  Doing it this way allows the refinance to close at 6 months and a day, rather than starting the process at 6 months.  Doing it this way makes doing a delayed finance and then a refinance less desirable in comparison.

Lee, that is not how my lender has seen my deals. Here is what I have done:

 - Buy with my own cash, rehab with my own cash

 - Get a private note to cover both (either do this day 1 or after I have rehab done)

 - perform a Rate & Term Refi on the private note with my conventional refi

In this model I was able to get ALL of my money back and I did it around the 6 month mark on each.

I see your details and agree totally with what you have written but I think the key is to Rate & Term refi.

thanks

b

 What do you mean by get a private note after you buy and rehab with your own cash?

I have built up a network of private lenders (friends, family, other) that can make 7% interest only loans for 1 yr. I setup the note tied to the property and then am able to take on more deals at one time.

Its hard money lender without the orig fees/rates and terms they set. Essentially this network of people trust my process and have told friends they are getting 7% return on their money so I have people just waiting to fund deals. I generally repay the note within a year but have it the full time just in case.

 So then you aren't buying and rehabbing with your "own cash" like you originally said.

uh, ok, yes I am. Let me be clearer.

Here the general steps I take.

1. Buy the house with my own cash

2. Begin rehab with my own cash

3. I look for private money to assume the full amount of Purchase+Rehab in a new private money note

4. Work with a bank (last year I used conventional, this year I have to go portfolio/specialized since I have too many loans) to then Rate&Term ReFi out of the private money into a conventional loan.

The money comes in stages. First I use my "own cash" then I use private money then I use a bank

make sense?