Starting out with my first brrrr rental

[Jared Hockensmith]

Hello everyone! So my goal for 2021 is to get my first investment property and I'm looking to use the brrrr strategy to start out. I'm a student still in school, I work full-time but it's 1099 income, not W2. (And house-hacking is unfortunately out of the option, already married and not looking to go that route) My credit score is solid, not amazing though (680-720 range). Since I don't have a lot of money saved up, my plan is to find a partner who can fund a down payment for an HML. Then, of course, I will get the refinance loan, and pay the HML off and the partner's DP with interest. Couple questions I still have: First, if I don't qualify by myself for the refinance loan, can someone co-sign on that? If so, does it have to be immediate family? Also, if I can get approved for the refinance, whether with a co-sign or not, will that affect my ability to get a mortgage on a personal residence SFH a couple years down the road? What might you do in my situation? Thanks and any and all advice/criticism is welcomed and appreciated.

[John Gunderson]

OP

I have done a handful of house hacks and 15+ BRRR deals. I love the idea. I was never able to pull off a 100% OPM BRRR, perhaps I lacked the creativity. A few potential snags I see you'll want to have a plan for:

1. Rehab Cost - It can be very difficult to hit rehab budgets on the first one... you get better at it over time but with 100% leverage there isn't a lot of room for error. There is a chance you have to pay cash to get the refi done even if you're right about the ARV.

2. Seasoning - bank policies can differ on this but beware of the equity being trapped for up to a year. This has happened to me. Sometimes the lender agrees only to learn more about the details of their own bank underwriting policy later and offer far less than you need. Or require invoice back-up for capex. Can’t stress enough how important it is to line this piece up and make sure the lender understands the plan.

3. Timeline - time between when you close and when you collect rent is a variable you need to have OCD around in your scenario. As you cost out this deal be realistic of the soft costs created by time.

I would recommend having some contingency $ stashed even if you coordinate this all with OPM.

The cool part is that as long as you get it done and you’re reasonably close on your projections you’ll end up with a rental property!