Financing Options Other Than Investing Capital

[Arron Paulino]

I have recently invested in 2 BRRRR deals where I used my personal saved capital on. My question is: How can I keep the ball rolling for more properties in terms of financing for them? I do have reserves saved for the 2 BRRRR deals. I do have enough money in my personal Roth IRA to purchase a property, but do not understand how I could potentially use those funds for another BRRRR (I think I read somewhere that I am able to pull out $10,000 max without penalty so long as the funds are paid within 2 months. Seems like enough for a rehab, but not a property. Could someone verify?).

Should I just wait to the cash out refinance later on and then go for another 2 then while continuing to save from my day job? I do not want to miss out on deals where the numbers work out and want to add them to my portfolio. I know of hard money lending, but am not very familiar with this route followed by refinancing. I look forward to hearing from the community!

[George C.]

@Arron Paulino Here's a financial example of a typical BRRRRR investor when combining with a hard money loan, hopefully it is helpful for you: The investor buys a fixer upper for 100k and obtain a hard money loan for 90% of purchase price and 100% of the 50k rehab. Which means $10K down payment plus closing costs/fees to consummate the loan. 

They now have a loan amount of 140k and will be paying interest-only monthly payments during the course of the term. 4 months later the rehab is done and the property now appraises at 220k. At that point, they refinance into a 30 year loan.

They refinance at 70% of the new value and obtain a 30-year loan of 154k before payoff of the 140k hard money loan, which would leave 14K to pull out before closing costs on the refi. In the end the borrower is left with approximately a similar amount of down payment money when they started the process to purchase the fixer upper to repeat the process all over again with a different property. 

The investor will be paying mortgage on the $154K loan going forward for 30 years.

The numbers may be simplified here but hopefully this helps you understand how it flows using some values.