“BRRRR” a primary residence

[Brody Veilleux]

Is it ever a good idea to "BRRRR" a primary residence, minus the renting part? Just buying a distressed home, renovating and refinancing it to recoup costs that can be used for future investments, then living in it permanently?

[Bryan Maddex]

Hey @Brody Veilleux

Lets first dismiss some really bad info that was stated by others:

Please, do NOT tell a hard money lender you are buying an investment property and then move into it! This is Occupancy Fraud, a very common type of mortgage fraud.  Hard Money lenders cannot lend to you personally on a home that you intend to occupy. 

203k Loans and HomeStyle Renovation Loans are NOT harder to qualify for. Some lenders do have minimum credit scores to access these loan types, but it is the exact same qualifications for income and assets as non renovation loans. 

Last, you can do an unlimited amount of repairs to a home using a 203k renovation loan (up to the FHA loan limit), including knocking down the house and building a new home! You have to keep the same foundation, but there is no requirement for a home to be "live in" ready to do a 203k loan. In fact, these loans are fantastic for homes that do not pass the appriasal!

Now, lets talk about BRRRR and a primary. You can do this, but need to do it slow. Fannie/Freddie now have a rule that if you are doing a cash out refinance, the loan being paid off has to be at least 12 months old. So renovate this year, cash out refinance end of next year is totally possible! Keep in mind that you can only go up to 80% Loan To Value (LTV) on a cash out refinance. You can put a heloc on after the refi up to 100% with select credit unions that will go up to 100% LTV.

For FHA 203 loans, you are allowed to not live in the property while renovations are being completed, so long as the renovations dictate that you cannot/should not live in the home. If you are just painting and replacing carpet, you still need to move into the home within 60 days of buying. 

Bonus Tip: Find a distressed HUD Home (google Hud Home Store) and you can buy a house for just $100 down! There are not many homes on the hud home store any longer, but they do pop up from time to time!