Investment LOC To Help Fund BRRRR

[Chelsea Knapp]

So my fiancé and I are at unit 6. 4 of those units have happened since March of 2020 and we’d like to get at least 4 more this year. Everything so far has been through conventional financing and no major repairs, bathroom renovation here, kitchen renovation there.

Each of the properties were house hacked and so we like saying that all of our properties are high enough standards we would live in them ourselves but now we want to go the BRRR route and be able to keep using the cash we can pull out when refinancing. We would not be house hacking the BRRRR however. The rental property he bought 10 years ago has equity built up in it. I called a couple local credit unions in Buffalo and one said they would do an investment property LOC at 80% LTV. We would pay a $575 appraisal fee. 15 years would be at 5.75%, 5 years would be 4.74%. They are fine with being second position as there is currently a mortgage on it. He would be able to pull out $40k or so. This money would be ear marked for the renovation and we should have $50k saved up between us from regular jobs by May for a down payment. We'd go through the brrrr, refinance and pay off the LOC and use what's left to go on to the next one.

Can people critique this, share your experience doing similar strategies, etc? I would love to get the experience of using a hard money lender under our belt, but this seems the better, less costly route for now until we prove the concept, experience a larger scale renovation first, and then jump in with hard money when we hit our stride and need it to keep growing.

[Matthew Irish-Jones]

@Chelsea Knapp so you will have $90K total? Seems light for a full BRRR if you are buying in cash and rehabbing. If you are putting 25% down it can be tough to have the bank finance a property that needs a full renovation. You may want to consider using a construction loan so you only need a portion of the down payment and a portion of the rehab.