BRRRR: Appraisal Timing and Mortgage Refinance

[Corey Farnsworth]

Hey BP Community!

Rookie investor here. I've been studying the BRRRR process for several months and I'm now situated to start making my first offer on properties. There are 2 things I want to clarify about appraisals and refinancing to make sure I'm crunching my numbers correctly.

1) I have enough cash to cover a 20% down payment (or close to it), but I will require a mortage to first obtain the property. That will require an appraisal right at the beginning, then of course we would do another appraisal after the renovations to determine the ARV and perform a cash-out refinance to restore my capital funds. The refi would cover my initial DP, along with any HML funds used for the rehab.
The Question: Does the 1st appraisal have to "expire" on a specific property after a specified number of months before a 2nd appraisal can be recorded for that same property? I thought that some lenders don't require much of a "seasoning period", but is the property even eligible to receive a 2nd appraisal within 2-3 months?

2) Do you find that the refinance mortage for a higher loan amount (due to ARV) tends to have a significant impact on the cashflow numbers?
       For example:
       Purchase Price Amt of $210,000 (20% DP, 4% rate, 30 yr term) makes the monthly mortgage payment ~$800
Refinance Loan Amt of $320,000 (25% LTV, 4% rate, 30 yr term) makes the monthly mortgage payment ~$1,145
Obviously that's nearly a $350 impact on the property cash flow! But this also assumes the ARV property can pull higher rent. I just want to make sure my deal analysis numbers are evaluating the end-goal cash flow correctly, considering the market rent before-and-after rehab.

Thanks for reviewing!

[Jon Kelly]

@Corey Farnsworth 1. The property is eligible for as many appraisals as the buyer/owner is willing to pay for. You're materially changing the value of the property by rehabbing, so an appraisal at the time of the refi is necessary. The appraisal before the property was rehab is now meaningless. 

2. "Significant impact on the cashflow numbers" is subjective... If you goal is to BRRRR the property then the mortgage payment before rehabbing is meaningless. Think of this as your monthly carrying cost until the property is rehabbed and rented. Of course the mortgage payment will be higher after it's rehabbed and the ARV and loan size increases. Your analysis should be based on the AFTER rehab numbers. ARV $320k, rent amount is $3k (?), expenses are "X" and mortgage payment is $1.1k. Crunch those numbers and you'll see your monthly cashflow and COC return. Then decide if that's a good deal to you or not.

Word of caution: most lenders won't provide traditional financing to properties that are inhabitable. I don't know the condition of your potential potential but you may want to ask lenders or your agent if you can get financing on it. 

You should also consider hard money lenders that provide short-term financing (3-12 months) for investors doing exactly what you're doing. They are referred to as: short-term, bridge or construction loans. The interest rates are higher (6-8%+) but they are interest only payments. It's a great option until you complete rehab and can refinance into a traditional loan.