First deal done, now I'm having the second deal slump

[Joey Samudio]

I just bought my first 4-plex in Cheyenne, Wyoming using a VA Loan with 0 money down. I want to get more multi unit houses, but I do not have the money to put down. Any suggestions for ways to get creative financing on my next deal? I'd like to try doing a brrrr with a 4-plex in the area, but I do not quite understand how to brrrr if I finance rather than have cash.

[Mike Dorneman]

@Joey Samudio Hey Joe- sonthe BRRR would start with the current 4 pled you own. You start with refinancing this loan. This only works though if your forced appreciation and increased the value of the property you purchased. Hypothetically, say you bought the 4 plex for 200k... renovated to add value and now it appraised at 275k. Additionally you increased rental income as well. A lender is going to look at the new value and the rental income being generated. The new loan will be based off of those factors. So now you refi the loan and if you’ve done it right, the property is valued at 300k, the bank will loan usually 75% LTV, which would be; 225k. Now that extra 25k is what you find the next deal with, assuming you didn’t go crazy on the Initial BRRR renovation.

[Jerry W.]

Hey @Joey Samudio, welcome to BP. The way a BRRR would work is as described above. The problem with you doing it is that you paid $0 down using VA. Even if you fix it up refinance your next loan will have a 25% down payment. In other words even if you increased your $200K property to be worth $250K you would still only get 80% of the value financed, so you could finance $187,500 is all. It is hard to BRRR with a VA loan as your original loan due to the 0% down.

I am up north from you.  Wish I had the market you guys have, things are pretty flat here.  I was pretty happy all of my houses here were full, and apartments.  I had one empty apartment in a neighboring town empty is all.  Had 3 tenants buy a house and move out this month and not one single bite on 3 pretty nice houses with decent yards.  I may have to eat the utilities and no rent until it warms up in about April or May.  November through February here is tough to rent.  I am also finding that renters are not staying nearly as long as they used to.  Tough economy here.

[Joey Samudio]

Thanks for the explanation @Mike Dorneman! @Jerry W. yes I'm lucky to be down here in this market, I'd imagine the rest of the state besides Jackson and Sheridan have the same problem as you.