BRRRR strategy Refinancing Question..

[Dennis J Marsack]

Hello everybody!

My Fiance and I were recently discussing possibly taking out a large personal loan to be able to purchase an investment property cash to try out the "BRRRR" strategy. We are just starting out so we don't have much capital and personal loans seem to be readily available and an easy way purchase with cash. I'm very aware that if I do this my credit score will tank due to the lopsided debt to income ratio. So my question is.. will that affect the odds of a successful cash out refi? I've heard from a few other people who used this strategy and it worked but I'm still a bit apprehensive..

Any thoughts will be greatly appreciated! Thank you

Dennis 

[James Masotti]

Originally posted by @Dennis J Marsack:

@Harjeet Bhatti so you think the bank wouldn't have a problem giving me a cash out refi loan as long as i specify that I will pay off the personal loan with it?

You'll possibly have to call around to a bunch of lenders, or use one of the national guys like Lima One who are used to working with investors. If you go with the strategy of using a personal loan for the purchase, than what you'll likely have to do is have the bank doing the cashout escrow the money and payoff the loans from the escrow account. If your credit score and DTI ration tank due to the loans, but they pull your full credit to see that you have solid history...than really their main concern is...if I give you this refinance are you really going to pay off that other debt or are you going to keep the money and blow it all on black at the roulette table in Atlantic City...so long as you can curb their fears that you aren't going to do this...than you have success.

Don't bother talking to Wells Fargo or Bank of America or any of the other big banks...you're going to be looking for smaller community or at best regional banks as well as credit unions who have more flexibility with regards to how they structure their loan terms.