Cash Out Refi/BRRRR with Conventional Mortgage

[Joshua Davies]

Hello BP! I have a question regarding the BRRRR/Cash Out Refi method. I understand that most investors using the BRRRR method are buying the properties with cash. However, I was wondering if it is possible to use this method with a conventional loan? I realise that most lenders will do a cash out refinance on a LTV of 70%. If I purchased a property (currently analysing one) for $75,000 with 25% down (loan amount around $56,000) and the ARV came in at $110,000 could I pull out the difference? Any help on this would be much appreciated! Thank you!

[Andrew Kerr]

@Joshua Davies the BRRRR isn't exclusive to buying with cash only. You can get some sort of initial financing (private money, Hard Money, commercial loan, conventional, etc..) then do a refinance to pull out cash.

In your specific scenario, you could buy the property at $75,000, fix/renovate, place tenants or occupy, then refinance at the ARV of $110,000. At a 70% LTV, that gives you a new loan of $77k, so you would essentially get all your cash back. Keep in mind most lenders like there to be 6 months seasoning before a cash out refi. Also be prepared to justify why the house is worth so much more in a short period of time. I found underwriters can be picky at times, so having before and after pictures and a detail list of work done can help.