BRRR strategy ..... Put 25% down or use a HML ??

Question

Just need some advice please, on whether to put 25% down on purchasing an Investment property via using the BRRR strategy ( assumes I use a Portfolio Loan ) vs using a HML ?

I will have the 25% down " Covered " , I.E. technically NO out of pocket on my end, as the $ for the 25% down will come from the Equity from my Primary.

I am just trying to approach this , by going the route with the LEAST amount of Red tape possible

Thanks so much for the help

Michael Dunn · Answer

Brent Coombs,

Fantastic

It' all now FINALLY makes sense to me , as to how this strategy works , in regards to  the " How "  we get enough Equity out of each property , to cover the 25% down payment on the next Investment/BRRR property, etc. , etc.

Thank you again for explaining it  :)

Michael Dunn · Answer

Brent Coombs,

Great points

As they say... Patience is a virtue

Brent Coombs · Answer

@Michael Dunn, what a Portfolio Lender will want to see is: your PORTFOLIO!

They may well lend out for multiple deals straight away, provided that you are putting down 25% of their TOTAL value. But, if the equity from your primary  is only enough for this ONE deal, then is it SO bad that you don't get to pass go for another 6 months?

Michael Dunn · Answer

Meant to also ask in the last post ...... When going for a Portfolio Loan to purchase an Investment Property , aside from having the money necessary to put 25% down, what other things Do the Banks/Lender look for and want to see, on whether or not they will give you this type of loan ?

Credit Score ?

X amount of money in your Bank account ...... 3 months worth of Rent?  6 months worth of rent ?

Michael Dunn · Answer

Jeremy Paschedag,

Thank you for your reply

No seasoning Period would be nice, for the simple fact that if the Rehab is completed in 3 months from closing, it'd be nice to be able to do the Cash-Out refi.  right then, and get the $ to put down as the down payment of 25% on the next property

Is the 6 month Seasoning Period mainly associated with Conventional ( 20% down ) loans ?  What about Portfolio Loans where you put ( 25% down ) .... Possible NO Seasoning with a Portfolio / 25% down loan ?

Thank you again

Jeremy Paschedag · Answer

1. No way around that, that I have seen.

2.  Because of 1, you have at least 6 months to complete the rehab.  You can do the refi once rehab is complete.  If you have a multi-unit, get one unit complete as quick as possible and get a tenant to start income.

If you have a self-directed IRA, you can do next to none of the rehab.  If you do not have this, then it depends on your local building/housing regulations.  Generally speaking, siding repair, painting, counters are all things you can do.

Michael Dunn · Answer

Brent Coombs,

Makes sense now, Thank you for explaining it

Real Quick Please......

1.  With using a Portfolio Loan ( or any other type of financing for that matter ) , to purchase Investment Properties using the BRRR Strategy , Is there any way to get around the Seasoning Period requirements.... I.E. having NO seasoning requirement ?

2.  And as far as repairing these properties , when you purchase a property as an Investment property, what timeline do most Lenders put on you, to have the property renovated and completed by ..... 3 months from closing ?  6 months ?

And what if you have the skill set ( and proof ) that you yourself can do certain repairs yourself ..... Replacing Rotten wood/siding, Paint the interior and exterior, do the Flooring, install new Cabinets and countertops .  Will most Lenders allow you to do that type of work yourself ?  And mainly just Hire out the Electrical and plumbing ( if Needed ) , as well as hire out having a new roof put on ( if needed ) ?

Thank you again, really learning a lot about the BRRR strategy and the in and outs of it

Brent Coombs · Answer

@Michael Dunn, basically, by "great deal", I mean ones that will still cash flow even if they are 100% financed (which every one of them really will be in the case of drawing down your primary for that first 25% down)!

The important bit is that: even though 100% of their purchase price will be bought with OTHER PEOPLES MONEY, because you bought RIGHT, you'll still have at least 25% equity in ALL of them! Cheers to that!...

Michael Dunn · Answer

And real quick ( Just to make sure I fully understand ) ..... You mentioned , " By great deal , I also mean: one whose cash flow ALSO covers the OTHER $21k! "

Does this mean that the next ( 2nd ) Investment Property, needs to Cash Flow ( Rent For ) enough money to cover both notes that I would then have ( the PITI on the Two properties ) ??

Thank you again, and I also appreciate the Vote for this Thread :)

BRRR strategy ..... Put 25% down or use a HML ??

Most Popular Reply