BRRRR Question

[Mikael Winkler]

Hello all,

I have a quick question about the BRRRR strategy. I am planning on buying my first owner occupied duplex in the near future with an FHA 203k loan, allowing me to roll rehab costs into the mortgage. After running numbers on a handful of properties, I'm seeing it's obviously very hard to break even on a duplex under FHA terms, much less cashflow, as there's only one unit producing income. So, I then plan on getting the property rented, reappraised and refinanced into a conventional loan.

My question comes in how that works. By refinancing into a conventional, are you essentially pulling the increased equity of the property, after refi, out to use as the down payment of the conventional loan? 

Thanks everyone!

[David M.]

@Joseph Chacko vellukunnel

@Eric Gomez

203k loans are specifically a FHA product. There is also a conventional renovation loan which is basically the same thing but doesn't include the FHA requirements and costs.

Yeah, I am going through one now, and getting everything lined up can be tricky.  As always, you need a good lender.  Its not rocket science, but even though you roll in the rehab costs, the property still has to appraise to cover everything.

@Joseph Chacko vellukunnelnot sure what your situation is, but you may not have a bunch of options.

I'd be happy to chat if anybody would like.