BRRRR vs BRROFR (Buy, Rehab, Refinance, Owner Finance, Repeat)?

[Rivy S.]

I've been attempting to find a property to implement BRRRR on here in the DFW area. Since I don't want to get involved with hard money, I need my all in price to be about 100K. From speaking to various people here in the industry, it sounds like that price point is more ideal for owner finance deals than rentals. Tenants on 100K properties are more difficult to manage, and turnover costs have a real impact. However, the main advantage of BRRRR is that you don't leave capital in any one property, because you pull it all (or nearly all) out when you refinance, thus allowing the Repeat step.

So what I'm wondering is: Is it possible/advisable to combine these two strategies? Buy a property, fix it up, refinance it to pull capital back out, and then turn around and sell it via owner financing? Will the bank who I refinanced through allow that? Will they know? Who pays property taxes and home owners insurance during during the period that the owner finance is being paid down? Will people be hesitant to purchase a property from me if I've got a secured loan tied to the property? And lastly, has anyone done this here in the DFW area that would be willing to sit down and chat with me about it?

Thanks in advance!

[Andrew Farmer]

It probably not a good idea to get a conventional loan since you're name & credit will be attached to the 1st lien. You'd be much better off getting the seller to "seller finance to you" then turn around and "owner finance" to an end buyer. I target "subject to" properties to owner finance. If you have to buy it for cash, then get it at a really big discount and find a private lender that will allow you to wrap the note. That way the private lender to you is in 1st position, and the note with you and the end buyer is in 2nd position.

Also, there's really no need to rehab it after you buy it. At most I'd just clean up any junk left behind and let the end buyer fix it up. That way "they" go over budget fixing "your" collateral.