BRRRR - The Refinance R- Let’s talk

[Daniel Curtis]

I'm assuming if you're reading this post you already know what the BRRRR method is (Buy, Rehab, Rent, Refinance, Repeat). I am wanting to discuss the Refinance R. I have listened to a podcast or two about this method and read a few blogs, but I don't feel like I've gotten all of the details.

After buying, rehabbing (if needed), and renting then it’s time to refinance. My question is fairly simple : Where does this money come from and how does it work? Is a bank giving you money based off the equity on the home? The total value of the home?

Getting started in REI is slightly intimidating to be honest, so I want to make sure I am confident with my knowledge and know what my game plan is.

Thank you for your time,

Daniel C.

[Kevin Sobilo]

@Daniel Curtis, there are a lot of different types of financing. If you own the property in your own name you could be looking at a Fannie/Freddie conforming type loan. You could also be looking at private money to refinance.

My BRRRR properties are owned within an LLC and I have been using commercial mortgages from local community banks. These are portfolio loans (they are loaning their own money, not reselling the loan). I can generally expect to get a loan at 75-80% LTV (of the appraised value) on a 15-20 year variable rate mortgage at prime + .5-1% interest.

One thing to ask about when talking to a lender are about their seasoning requirements. They will likely require you to own the property for a period of time before basing a refinance on a new appraisal. This period might be 6-12 months. Before this time they would typically value the property at the price you purchased it for plus your rehab costs. So, waiting for the seasoning period to pass will allow you to refi out more money.