A little info on the BRRRR method

[Jared Sandler]

For people new to REI, fixing and flipping a house is one strategy...Your other option is to BRRRR the property.

1) Find a refinance company that will refi with low or no seasoning and low or no documents (asset based).

2) Find a hard money company that will go 75% LTV and 90+% on the purchase and 100% on the repairs (keep your out of pocket low).

3) Find a property within the 75% LTV when looking at ARV.

4) Close on the property.

5) Repair the property quickly.

6) Rent it out.

7) After 5 - 6 months, refi the property (not cash out but regular refi).

8) Watch your cashflow come in.

Money this should cost you on a similar priced place to the one you bought:

ARV: $175k

Purchase: $100k

Repairs: $30k

Loan: $120k (90% of purchase / 100% of repairs)

3 Points: $3,600

Fees: $1,000

Interest: $1,296/mon (assuming 13% APR)

Utilities / Insurance / Tax: $650/mon

All-in Out of Pocket: $20,438 (assuming 3 months of holding before rented)

If you could get a property worth $175k for $20k with out PMI, you are coming out a head. You refi the $120k borrowed and have $55k in equity already in the property. Since this has a slightly higher ARV than your last property, I hope you would be able to get $2,000 in rents.

This is just a quick example of how to use hard money in a BRRRR. If you have any questions, post them here and tag me.

Actually 55% of our notes are BRRRR notes (60% in Houston). Not for flips.

Quick Example:

Purchase: $125k

Repairs: $20k

ARV: $200k

Points: 3

Interest: 13%

Fees: $1,030

Total Cash to Close: $5,380

Monthly Interest only Pmts: $1,585

Total Financing Costs (3 months): $5,380+$1,585+$1,585+$1,585=$10,135

Cashout Refi at 75% of ARV = $150k

$145k (Borrowed Amt) + $10,135 (Points + 3 months Interest) +$2,100 (Est Title Closing Costs) + $2,900 (Est Utilities + Prop Tax) = $160,135 Total Investment - $150k Cashout Refi = $10,135 Total Cash Invested in Property

If you are use the Buy Rehab Rent Refi Repeat method that is promoted on this site you can buy rental properties for just $10,135 for a property worth $200k (or roughly 5% down with no PMI). This is how I bought my two duplexes and my Airbnb.