BRRRR cash out refinance after 6 months

[Michael Vasquez]

I see a lot of people talking about the BRRRR strategy and being able to do a cash out refinance after 6 months, but I can't find a lender that can do it sooner than 12 months. I've tried at least a dozen local banks and portfolio lenders. The terms I've been given have been between 15, 20 or 25 year amortization which won't work on the cash flow side for the BRRRR system. I only found one that will do it, but only at 90% of purchase cost which defeats the purpose of this strategy all together. Plus the interest rates are only going to go up at this point, so waiting a whole year will cost at least a 1/2 to 3/4 points more than now and I'd have to continue to pay a higher interest rate to the HML.

For all the people who have actually used this strategy, can you please message me your lender's contact info. I know not all lenders will work in all markets, but it's worth a shot. I'm investing in the Austin area now.  

Thank you in advance!

[Chris Seveney]

@Michael Vasquez

My suggestion would be to go to local REIA meetings and see who people are using. I am in Washington DC area and have not had any trouble finding local banks to loan with 6 months of seasoning at 75% if the appraised value

[Russell Brazil]

If you are being given terms of 15, 20 and 25 years that indicates to me you are looking at portfolio loans. The 6 month criteria is for a Fannoe/Freddie loan, and I think they only do the cash outs on the first 4 properties. 

Touch base with a mortgage broker instead of going to lenders yourself.

[Shaun Weekes]

@Michael Vasquez

It's hard to find this because TX has this rule about cash out refinances.  It's called Texas Equity (A)(6) and typically it's only available for primary residences.  

One option although it's expensive is to do a cash out after 6 months with a HML, Private Money lender or portfolio lender and then right away do a rate and term refinance with Fannie or Freddie to avoid large fees.

I hope this helps and have a happy new year all.

[Aaron Cullen]

@Michael Vasquez

I actually know a lender based in Dallas that will do Cash out Refi with no seasoning. 

Her name is Kim Sporich at kbslending. You can look her up pretty easily.

They only service loans in Texas, so you are golden. Wish I had property there...

Good luck!

[Brent Coombs]

@Michael Vasquez, you wrote: "The terms I've been given have been between 15, 20 or 25 year amortization which won't work on the cash flow side for the BRRRR system". That didn't quite make sense to me. Are you saying you'd be cash flow negative? In which case, why would you consider it a "deal" in the first place?

My point is: it doesn't have to cash flow MUCH, so long as it's still positive. The reason for the refi after all is to get you your deposit back, so you can buy ANOTHER (and so on).

ie. The reason for the refi should NOT just be to get out of HML interest rates! Because, if that's ALL it accomplishes, you'll be doomed to initially pay HML interest rates - EVERY time!

You REALLY need to get your own 25% (one-off) deposit saved - ASAP. Cheers...

[Krystal Coffman]

I'm in the DFW area and just did the BRRR method. Used Guaranteed Rate... had to wait 6 months to do the refi at the current appraised value.

[Michael Vasquez]

Thank you for all the responses. 

Chris & Russell, 

I've already spoken to over 20 lenders and brokers. It's the exact terms I'm looking for that is the problem. I can get almost what I need, but then the lender wants a recourse note which my partners don't want to do. The properties are bought well below market and will continue to appreciate in value here in Austin, so I think we may have to go that route.

Shaun,

Texas Equity (A)(6) doesn't apply to investment property. You can still do a cash out refinance on investment properties in Texas.

Aaron,

Thank you for the contact. I messaged Kim and she is not able to cash out refinance on LLC owned properties.

Brent,

We wouldn't be cash flow negative, but there is a $200+ difference in net profits from a 25-30 yr loan. We'd like to keep that extra income in our pockets and at the same time get back as much cash as possible to use for another deal. We have plenty of money and typically pay cash for our projects. Now we are trying to leverage our cash so that we can pick up more properties. Austin is a VERY aggressive market and there is a lot of competition here and good deals are very hard to find.   

Krystal,

Can you please send me your lender's contact information. Thank you

[Stephanie P.]

@Michael Vasquez

Not picking a fight here, but leaving out the part about non-recourse is a big deal. That's why you're not refinancing using BRRRR, really no other reason.

There is a lot of money out there to refinance the flip to a 30 year loan, but all that I've found, are full recourse loans even on llc's.

Stephanie

[Michael Vasquez]

I understand that all the loans will be recourse and am ok with that. I still have not been able to find a lender to do a cash out refinance at 80% of appraisal with a 30 yr loan. Plenty will do 70-75% or 15, 20 & 25 yr terms. I literally only found one that will work at the 80% and 30 yr, but he won't go south of Downtown Austin. That will work for some of my deals, but not the ones I have now. 

Can you send me a few that you personally know of that can do this? 

[Stephanie P.]

@Michael Vasquez

Best terms out there for you on a single family non owner are:

70% ltv. 

No seasoning

No income verification

30 year amortization

650 minimum score

Rate in 7's on a 3/27

You've got a lot of moving parts that cancel out each other like cash out, seasoning and 30 year

Stephanie

[Brent Coombs]

@Michael Vasquez, if "plenty (of lenders) will do 70-75%" of their appraisal for 30 years, but you instead want 80%, then I don't concur with your assessment that "the properties are bought well below market". BRRRR really requires you to be all-in for LESS than 75% appraisal! Another 2c...

[Michael Vasquez]

Stephanie, 

Thank you, but I'm looking at 2-4 units, not single family. I'm ok with 6 months seasoning and yes I do have a lot of moving parts. I'm getting closer to figuring out which lender and which system will work best for me. 

Brent,

"Well below market" for me is what I should say. I'm conservative on my ARV estimates. The Austin market is EXTREMELY competitive and there are very few 2-4 unit deals that make sense for a BRRRR. There are zero all in for less than 75% of ARV. You're lucky to find a fixer upper for 75% ARV not including fix up costs right now. When something does come up for that number, it easily gets 5+ investors bidding it up.

The play in Austin is long term buy and hold. Home values have increased way too much to make financial sense and there are a lot of newbies getting into the game. I personally know a lot of seasoned home flippers that have gotten out of that business altogether and now are rehabbing homes instead for the new investors. They make more money over charging and have less stress.

Bradley,

I'll message you shortly. 

[Brent Coombs]

@Michael Vasquez, are you wanting TOO much? Great cash flow, PLUS all your cash back, plus low interest for 30 years, plus 80% leverage, in an overheated market to boot. Really?

Those are the sort of fantasy expectations that got the USA (in particular) in strife - just 9 years ago!

In short, BRRRR is not expected within markets if you can't buy/rehab all-in for 70% appraisal.

And, it's not a Lender's job to make it too easy for you to just choose your own hyped market.

It's SUPPOSED to require research and diligence and bargains-between-the-cracks abilities. 

If I had to pick one thing you should ease up on, it'd be cash flow. (Ensure it's positive, not "great"!)

[Michael Vasquez]

Brent,

What can I say, I'm an aggressive investor. You won't know what you can get until you ask for it. I'm not expecting all my cash back, but getting at least 50-70% of it in 6-9 months and the rest within 2-3 years isn't too much to ask for. I'm buying distressed properties that I remodel, lease and manage myself. 

This type of investing isn't what got us in strife 9 years ago. It was speculative investing, no documentation, stated income and fake loans that did. 

I never said it was the lender's job to make it easy and I'm not choosing a, "hyped" market. The market here is not the same as it was 9 years ago for many reasons. I do this full time as a Broker and Investor. I was here when the market crashed in 2008 and definitely learned from those mistakes and know what to look for. Part of which is why I won't touch SFR as an investment in Austin nor will I do a SFR flip.

Research, diligence, bargains and positive cash flow is what I'm doing. I'm only looking for other ways to get creative instead of tying up all of my money on one or two projects. Right now I'm buying one distressed multi-family unit a month. I can't do that the conventional way.  

[Brent Coombs]

Michael, what else can I say? Good luck with that...

[Stephanie P.]

@Michael Vasquez 

The terms I  laid out work for 2-4 unit properties as well. With more documentation, we may be able to I ncrease ltv to 75. Either way, we can have you closed in 2-3 weeks depending on how fast you can get docs in and the appraisal finished. 

We'll be here when you're ready. 

Stephanie