BRRRR Exit Strategy Advice Needed for San Diego Property

[Jake Vayda]

Hey BiggerPockets community,

I’m looking for some advice on an exit strategy for a BRRRR deal I'm working on. I've done this method once before, but this time I'm a bit torn on the best approach. I am looking to buy again in the next six months.

Here’s the situation:

• I own a home in San Diego, currently worth about $1.05 million once the ADU is built.
• I owe $680k on the mortgage at 4.25%, with monthly payments around $5,500.
• The property generates $7,500 in monthly income: $5,200 from the main house as a vacation rental and about $2,300 from the ADU as a mid-term rental.
• My broker is advising me to do a cash-out refinance and switch to a DSCR loan, then move the property into my LLC.
• I’m hesitant because current interest rates are around 8%, and I was originally considering a HELOC due to these high rates.

Given the high rates, would you recommend sticking with the HELOC, or does the DSCR loan make more sense in the long run? I'd appreciate any thoughts or experiences you have with similar situations.

Thanks in advance!

[River Sava]

Hey Jake - 

Rates are currently around the 7's, but the exact rate will largely depend on factors like your cash flow, LTV, and FICO score. You can also consider buying the rate down with points if that's a better fit for your strategy. If you're planning to continue growing your portfolio, having an LLC is never a bad idea for that extra layer of protection.

Regarding your decision between a HELOC and a DSCR loan, it's essential to weigh how both options fit into your long-term goals. I've included an article below that dives into how DSCR loans work within the BRRRR method, which might provide more clarity.

Happy to connect and discuss further if you have any questions!

https://www.biggerpockets.com/blog/brrrr-loans-what-are-the-...