BRRRR but AirBnB instead of Rent?

[Andrea Cole]

Hi! My husband and I just closed on our first investment property last month, a duplex in High Point, NC. We're currently rehabbing it and hope to have it complete by the end of November. Since we're in an area that gets some decent traveler traffic, we're hoping to AirBnB instead of rent it. However, we'd like to BRRRR and pull our money out at the 6/12 month mark. Has anyone been successful in doing this? I feel like we're entering uncharted territory and I'm trying to prepare our game plan, which is difficult with very little refi info available.

TIA!

Andrea Cole

[Chris Mason]

Originally posted by @Andrew Wong:

@Chris Mason, ahh I see. I've never done a rehab + refi, only read about the process. It's really a function of the property's ARV compared to your W2?

BRRRR w/ conventional financing is far more nuanced than people doing it on the podcasts indicate. They, typically, are also on their 8th or 9th mortgage, so there's a lot going on that they don't even think to mention.

By default, if you walk into a  big bank or credit union:

- You make $10k/mo, no consumer debt.

- Personal home PITI $3000.

- Post-refi PITI of the property you just rehabbed will be $3000.

- $6000 / $10,000 = 60% DTI, loan denied. 

Better math that makes it work....

- You make $10k/mo, no consumer debt.

- Personal home PITI $3000.

- Post-refi PITI of the property you just rehabbed will be $3000.

- You put tenants in place, jump through a bunch of hoops (which do NOT include waiting 2 years for it to appear on tax returns), and the property will be cashflow positive $500/mo.

- $500/mo added to income, you now make $10,500.

- Total debts are just your primary residence @ $3000.

- $3000 / $10,500 = 28.6% DTI, loan approved. 

There are countless threads about folks stuck at the refi portion of BRRRR because they did the "walk into a credit union" option above.

Here's a thread about BRRRR + Financing Stuff taken to the extreme, done right.