BRRR & Refinance (Cash Out) Exit Strategy

[Daniel Sisto]

So I purchased a SFR about 3 weeks ago and the renovation process has been underway for about that same time. Along the way we have come along some unforeseen costs that will force us to eliminate some of the design work we had in place.

As another exit strategy I am considering the vehicle of Buy, Rehab, Rent & Refinance as mentioned numerous times here on Bigger Pockets. I do understand the concept fairly well since it is pretty self explanatory but I do have a question in regard to the refinance or cash out on the back end.

This SFR was bought with cash and was wondering when the refinance step approaches, what is the best way to find the most beneficial percentage of being cashed out at?

Should I expect a cash out % of 70-75% of the assessed value of the home?

Thanks BP. I appreciate the assistance!

[Jerry Padilla]

@Daniel Sisto

@Christian Bors

BRRR Cash Out Financing....... Some Conventional Guidelines

• The typical cash out financing is done after 6 months of owning the property, based on ARV and available for mortgages #1-4. Please see delayed financing for less than 6 months after closing.
• On a primary residence you can pull out up to 80% LTV on a SFR and up to 75% LTV on 2-4 unit multi-families.
• On an investment property; A SFR if you have #1-4 mortgages you can pull out up to 75% of the equity and a duplex is up to 70% equity.
• On an investment property; If you have #5-10 mortgages you can only pull out money in the first 6 months (delayed financing) that you own the property, if you didn't originally get a mortgage on the property. As long as the value is there (on a SFR 70% LTV and duplex 65% LTV) You can take out up to the purchase price plus closing costs on the property.
• If you are willing to pay the fees and go through two closings.... You can take out private or hard money on free and clear properties #5-10 and do a rate and term refinance with conventional to pull money out on them.
• PROPERTIES LISTED FOR SALE
  For a rate and term refinance transaction, the borrower must evidence that the listing has been cancelled, and must not have been listed for sale as of the date of the application.
  For a cash-out transaction, the borrower must provide evidence that the listing was cancelled at least six months prior to the date of application.
• Cash Reserves Required For Other Properties Owned by Investor;
  
  • If the borrower has 1-4 mortgages, an additional two (2) months for every other SFR investment property and second home is required and additional six (6) months for every other 2-4 unit investment property and second home
  • If the borrower has 5-10 mortgages, An additional six (6) months for every other investment property and second home.