FIrst time house hack brrrr

[Sebastian Roy]

Hello everyone, I am a newbie investor looking to brrrr house hack my first property. I've done some extensive research on the brrrr strategy as well as the house hacking strategy but I need clarity on some questions.

First, I am unsure which type of loan to use to purchase the property (conventional, FHA, HML, 203k, etc.). I have already been pre-approved for a 30 year conventional loan with 4.25% interest rate and 3% minimum down payment. The maximum amount I could borrow from this lender is $200k. I believe a conventional loan like this one would be a good fit mainly because private mortgage insurance automatically stops once I reach 20% equity in property.

    Secondly, I am undecided on how much of a down payment I should put down. I do have approximately $30k saved up for a down payment (including closing costs) and repairs. I'm thinking I should put low money down (3-5 %) for a couple reasons. First, I am planning on selling or exchanging this property in the future, so I am not too worried about paying off the loan asap (although I know a lower down payment means a higher mortgage and less cash flow per month). Second, if I were to finance a property for $200k, a 3-5% down payment would = $6,000 - $10,000 + approximately $6,000 in closing costs totaling $12 - $16k. This leaves me with $14 - $18k for repairs, which doesn't go very far. Lastly, and most importantly, a lower down payment would make it much easier to pull out all if not most of my money invested when I refinance, as opposed to a higher down payment such as 20%. 

    If anybody has any advice or stories about past properties it would be much appreciated!

    Thank you, Sebastian.

[John Warren]

@Sebastian Roy starting out you should pretty much always use a low down payment loan. The trick is to force the appreciation through renovations, better management, etc. Once you have enough equity, you cash out refinance and get all your money back. The issue with the low down payment loans for this strategy is that you have to get a screaming deal to make it work, and the FHA loan by its nature is NOT intended for screaming deals.

The other issue with the BRRR is that it makes younger investors be too aggressive sometimes. I am in the midst of my first true BRRR now (hard money/cash headed towards a cash out refinance) and I own 58 apartments already. I finally have the team in place and the net worth to pull off a riskier deal. Not everyone should be that aggressive. The low down payment loans are cheat code unto themselves!