Can you BRRR a foreclosure buy?

[Shawn Collier]

Does anyone have experience in purchasing foreclosures or pre-foreclosures for below market value and then refinancing based on full value and taking some or all of the difference at closing as profit to invest in additional properties? If yes, what type initial financing (bank or private money) did you use and how did you go about the refi? How quickly were you able to refi?

[Randall Alan]

So the first thing to know about buying "true" foreclosures (like at your county's foreclosure sale) is that they are an all cash affair.  You bid, you have to "close" the next day.  There is no time to get traditional financing... but perhaps you could line up hard money in advance.  "Pre-foreclosures" are really more a typical sale - but more out of 'desperation' and can follow whatever lending you have time to line up with the typical 30-60 day turnaround. 

As for refinancing a property you have purchased... if you used cash (didn't finance it) - you can immediately refinance it and get cash out - although during the pandemic this type of lending has been more 'sparse'... some lenders have quit writing cash out loans until the economy settles down.

If you financed your initial purchase with a bank loan, there is typically a 'seasoning' requirement - which is to say they bank isn't going to let you refinance it for a period of about 6-12 months. Some banks are also finicky about revaluing a property that was so recently purchased - even if rehabbed. They will try and use the purchase price as the rehabbed price for a certain period of time.. totally defeating the BRRRR method. You would just need to shop around to see how each bank does it. Just explain your objectives and they will nicely tell you how they do it.

Randy