This BRRRR is turning into a GRRRR

[Scott Hollister]

Hello All,

I have successfully bought, rehabbed, rented, and.... The refinance has been one of the most difficult parts of the whole process. Every time I get close to refinancing out the property, some new regulation has taken place.  

Purchase Price: 100,600 (3 Bed 1 Bath) on 7/5/16

Total Invested: 117k (Rehab and closing costs) (Hard Money 95k and HELOC on primary 21k)

ARV: 187k

Rent: $1575

Tax: $4800 year

Insurance: $1200 year

Hard Money Loan: $950 month

• At first I couldn't get a loan because of my DTI ratio. (Multiple properties, student loans, and teachers salary) I have perfect credit and RE investing since 2012.
• A commercial loan is possible but it will not net me any of my sweat equity. (DSCR puts me right around 117k and 5%)
• So I then decided to move in so I could get a owner occupied note and go up to 80% LTV.
• My lender (Conventional Fannie/Freddie) says the home has to be out of the LLC for 6 months... Doesn't work, note is due in August 2017
• I try another lender (Local portfolio lender) and they say that I have to live in the property myself for 12 months before they will lend. 

My question: Have you gone down this path before? If so, what are some options I haven't explored yet? I am still currently talking to 2-3 other local credit unions. I will be moving into the property on the 5th of July with my GF (Yes I have thought that through) 

Thanks for the insight! 

[Andrew Ware]

I'm often a little befuddled when I see complaints about BRRRR or whichever strategy. I'm not so much talking about the original poster because he is looking for solutions. You are a little thin on the monthly rent at .8% monthly rent for 187k property so I'm not surprised the banks aren't jumping at it. It would, however, be a pretty successful flip. You'd get a return of something like 55k-60k after debt service, insurance, realtor, etc? At the very least even with the 5% loan you nearly have all your money out and holding 37.5% equity? I don't understand the complaint. Your profit is sitting in equity and that you have a good condition rentable house. The rest of the "sweat equity" that you'd like to take out has gone to your lender. That's the cost of doing business without capital.

Another poster is saying he has a great candidate except he'd be underwater in 6 months. Well that's not even a good candidate. At least not in the position you are in with the money you have available (at least not with my definition of underwater.)

It's true BRRRR is not a cure all. And neither is anything else. I'd like to house hack, all I'd have to do is divorce my wife and put my mother in a home.

As an actual response to the post I'd try shopping it to 20-30 more lenders not 2 or 3. You've got to find that lender who understands your vision and wants to do business.