BRRR Refinance Question

[Nick Causa]

So it looks like our renovations are going to be well over what i expected (im sure thats never happened to anyone, right?). Which will mean our cash out upon refinance is definitly not going to cover the reno costs and it looks like we’ll be repaying what isnt covered. First has anyone ever had that happen and how’d it go? Second are there banks that will give you 80% of the value of the home as opposed to 75% on a cash out? I feel like everywhere I’ve read, banks always leave 25% in the property on cash out refis. Anyone ever see anything different? Are there lenders that will leave 20% in and give you 80% especially if the DCR is sufficient? Because of our rental income potential, our DCR wIll be more than enough which will be great for future cash flow but leaving 25% equity in the house is a game changer making repaying the reno costs up front difficult. Thanks for the help.

[Nick C.]

This happens pretty frequently, and it's one of the hundreds of reasons why having reserves is so important. It's not the end of the world coming out of pocket a bit on the front end. 80% is very aggressive, I can see it happening with a smaller bank you have a relationship with, but that's a lot to ask of a new lender you've never done business with before.