BRRRR Seasoning Question

[Lee Fahy]

I purchased a duplex on 20 July 2016 with the intent to rehab and rent the property using all cash. I then discovered the BRRRR method and would like to refinance to get my cash back out to start another. My question is about the seasoning process:

- Renovations were done personally and took the entire year in my spare time, the first tenant will move in 1 August. 

- Being there have not been renters in the calendar year will I have to wait another year to refinance (with actual renters in the property) or will I be able to get the appraisal and refinance on 20 July 2017?

Any comments will be greatly appreciated, thank you. 

[Mark J.]

Great question.

#1  The single biggest factor is having a small group of great trades guys / companies that you can rely on to do good work for a reasonable rate, that also communicate well and are easy to work with. Far and away, this is THE most important element that has sped up my reno projects. My first project took six month because the contractor I used was slow, incompetent, and in the end, walked away from the project with $10K of work & materials I pre-paid (stupidly) for and didn't receive. (that's a LONG story). I also hired/fired multiple teams of tile guys and plumbers who did ****** work. Vetting trades people can be a very long and expensive process, which is why you sometimes may find that other investors are hesitant to share their contacts because they've spent and lost a LOT of money to finally find those guys. This also extends to keeping great relationships with merchants and the guys at the Home Depot Pro desk.

#2  Invest in your own education. Over the last few years, I've learned a ton about renovating houses and can do a lot more of the work myself. Particularly with plumbing, something that I was very intimidated by, the new SharkBite connectors and other newer technology makes plumbing almost as easy as putting together Legos. My knowledge also allows me to quickly assess the skills and knowledge of someone I'm potentially going to hire. The learning curve can be steep in the beginning but investing your own hands-on education (and learning from your costly and time-sucking mistakes) is biggest payoff. I also don't tolerate poor work. I give new trades guys a simple task to begin with and immediate assess their work. I don't like what I see, I pay them for the day's work and fire them (nicely of course). This wasn't the case in the beginning-- I'd give people multiple chances which accomplished nothing but increasing my stress level, delaying the renovation, and costing me more money.

#3 Build a reno "book". Once you've done a few renos, you'll know which paint, flooring, colors, fixtures, cabinets, etc. etc. to use. Depending on the type of investing you plan on doing (flipping vs buy-and-hold), you can simply rinse-and-repeat from past projects. This also helps me more accurately create a budget for the reno which means I can better estimate a real BRRRR cash flow. I know I'll be buying the same tile from Home Depot at $ per sqft, that I'll use such-and-such paint of these two or three colors, and buy these specific cabinets because I've discovered even though they're inexpensive the quality is still good, etc. etc. I keep a Word doc (my "reno book") of the materials I use and that I can place orders earlier in the reno process and get materials on site faster which means less trips to Home Depot and big cost savings & bigger discounts when placing fewer and larger orders. Also, you gotta be a savvy shopper-- for example I always take advantage of Home Depot's zero percent interest for 18 or 24 months coupons they send me few months. This often means I only have to spend a few hundred dollars out of pocket for $10,000 worth of materials which I'll pay off once I get money from the cash-out refi.

I'll think more on your great question and come back to this thread to update...

;) Mark...