Delayed Financing for BRRR

[Tae C.]

Hello all,

I've been trying to figure out exactly how delayed financing exemption works and how it would apply with a brrr strategy. Obviously we typically talk about brrr as finding a distressed property and making sure that all-in with rehab costs, the project costs around 75% of ARV in order to do the cash-out refi after seasoning.

My question is, if you bought the property itself all cash, couldn't you DFE all your cash back out without having to meet any certain percentage of ARV in terms of total cost of project? The only thing you would have to make sure of is that your purchase price itself was 75% or less of the appraised value. So to be more clear, an example:

• purchase price $50k all cash

• rehab cost $30k

• ARV $85k (note, all in cost nowhere near 75% ARV in this case)

• purchase price of $50k is 59% of the $85k ARV

• refinance at 75% LTV of $85k - you get $63,750 cash back in theory minus closing costs...

So am I missing something here? There was no need to get an incredible deal that had to fit under 75% or even 80% ARV through this DFE all-cash purchase method, yet you can refinance all of your initial cash back, and then some. Please correct me if I am misunderstanding. But if this is correct, all of a sudden, assuming one has the appropriate cash and access to rehab loans, this seems to really open up criteria for brrr successfully (assuming rent-to-value is of course still strong enough). Welcome any input.

Side note: this is assuming access to a lender who will refinance at 75% LTV of course.