BRRRR With Traditional Mortgage

[Paul Lambert]

Hello all! 

I am still learning a lot about real estate. Every time that I hear somebody talk about BRRRR, it involves hard money up front which hurts, even paying just interest. Most of the properties I look at have tenants and are livable. Is it possible to get a traditional loan, then rehab (pay cost out of pocket for this), rent, then refi for the improved value?

Thanks!

[Alexander Flores]

@Ryan Blake @Paul Lambert

Ryan's answer pretty answers your question perfectly.

Theoretically, you could do exactly what you are asking but you have to make sure the numbers work. You would have to wait a minimum of six months to do a cash-out refinance to BRRRR out of the first mortgage. You would incur holding costs and other costs that would not be in your rehab.

Paying for two sets of closing costs on traditional mortgages would eat heavily into your numbers. We only got 70% ARV on our first BRRRR.

Nothing is impossible but could be very improbable. If the numbers work then they work but know that estimates are just those. 

Any other questions let me know!

I have BRRRRed both our rentals and also refinanced out a live and flip prior to selling.