Conventional Cash Out Refi on an FHA loan

[Tim Steward]

Hey guys, 

I am in the educational/planning phase of my real estate investing career. I plan on starting out with a house hack using a low down payment to buy a duplex and rent out the other side. I would love to incorporate the BRRRR strategy with this house hack. However, I am just having a hard time understanding exactly how a conventional cash out refi would work with the FHA loan. I have been trying to get the numbers down and have just not been able to grasp the concept. Any help/explanation of this concept would be MUCH appreciated!!!!

[John Leavelle]

Howdy @Tim Steward

Combining these two strategies is extremely difficult. The BRRRR strategy is predicated on a rapid increase in appreciation and equity in order to successfully complete a cash-out refinance. The House Hack strategy starts you off with almost nothing in equity. I really doubt $5K in Rehab will effect a big enough increase in appreciation to allow you to complete a cash-out. The property would need to be distressed, purchased at a significant discount, and require a larger Rehab budget. It would be more like $50K purchase price, $30K Rehab, $10K Holding and Closing costs. FHA 203K loan would be used for acquisition. ARV $120K. Refinance loan at 80% is $96K. If you can get these kinds of numbers then you may be able to do it.