Brrrr one property at a time with cash?

[Andrew Neal]

I have a question and would love to know who may have implemented this strategy or could advise for/against it. Let's say you have 100k to invest. Would it be wise to buy a lesser expensive home cash for say 70k, put in some updates for maybe 20-30k and then try and take out 80% of your money to do again? I am familiar with the Brrrr strategy however most often times people talk of buying with low or traditional down payment as opposed to buying the property and doing all the rehab with cash. Anyone have some examples of why you would or wouldn't want to do this?

[Jorge Ruiz]

@Andrew Neal

Here is something I learned and am looking to implement once the opportunity presents itself:

Create an LLC and have the LLC lend you a mortgage on the property you are receiving. The reason why this works is because instead of you needing cash or receiving a cash out loan, we are now refinancing a loan – your loan. There no reason to wait any time or have any "whichever is lower" rule come into play. We are just refinancing a loan. Here's how it works:

You create an LLC. You buy a home. Your LLC gives you a loan for the home. You file the deed for that loan at the county courthouse. You use the money from the LLC to buy and fix up the property. Once the property is completed, your conventional lender comes to refinance the loan. Your conventional lender runs title and sees there is a loan. Your conventional lender refinances you into a new loan, and cuts a check to your LLC in the amount of 75% of the value. Please don't confuse this 75% with a "cash out" amount. The non-cash out LTV on a refinance is also 75%. We are refinancing a mortgage. Your LLC's mortgage. Essentially your LLC has become the bank/hard money lender/etc. However you want to think about it. You get to set the interest rate (it can be 0%) and you get your investment amount back sooner. Some things to think of:

To file a deed at the county courthouse is $100-$150 in cost (depending on which county) And you want that note to be pretty close to 70% of the ARV for the property if you don't want to bring any money to closing. 70% will allow you to roll in your closing costs. If you want it to be at 75% just keep in mind you would need to bring your closing costs out of your pocket to complete the refinance.

Hope this helps..