Combining BRRRR and FHA??

[Dallas Schwab]

Hi everyone!

I'm a newbie in the OKC area looking to buy my first property and have a financing question. I'm fairly familiar with the BRRRR method, but I have a question on the "Buy" portion of that and how to get that cash. I understand there are conventional loans, private/hard money, etc. but want to explore all options before I jump in. I'm curious if I could use an FHA loan so that I can acquire the property with 3.5% down.

Here's what I'm thinking with hypothetical numbers: Buy a $100K duplex/4-plex/etc. using an FHA loan. Make the necessary repairs, say $15K, and the ARV is then $150K. I do a cash out refi and get 75% of the ARV ($112,500). At that point I will have rented the units for good cash flow, no longer have to deal with PMI, and will have some cash for the the next property!

1. Is this possible? 

2. Am I understanding the BRRRR here?

Thanks!!

[Keishee Hill]

Dallas Schwab looking at the numbers you provided in this thread, there would not be enough equity for you to do a refi cash out regardless if you use a 203k or not. If the purchase is $100k and repairs are $15k, you are already at $115k and you said 75% of the ARV is $112.5k. So, if you put 3% down, the loan will be $112k...the only thing you could cash out is $500 (the difference between the 75% of the ARV and the loan amount. If you can find a bank that will refinance at 80% of the ARV because you live there, at least you could cash out $8k, but you would have to continue to live there.

But yes you can do a refi cash out with a 203k loan. You can even use the same lender if you wanted to.