$115,000 to $230,000... Overcoming Obstacles

[Jason Macht]

I wanted to share a story of overcoming obstacles and 3 lessons I learned along the way with executing the refinance step of the BRRRR strategy. I was able to effectively double my money with a little persistence and drive, going from $115,000 to $230,000.

Lesson 1, all banks are not created equal

Time and time I’m reminded of this and have figured out a couple of things.

• Understand that banks differ in their policies and requirements
• Talk to 10+ banks, especially credit unions or local community banks
• Some banks don’t offer certain products. Other banks don’t offer certain products to certain types of customers; they’re all different.

Here’s one personal example of 3 different product structures I came across and was able to refinance the money into the 3rd banks pricing:

• Bank 1: HELOC / 10 year / Prime + 2.25% (5.5%), up to 100% LTV
• Bank 2: HELOC / 20 year / Prime + 1.25% (4.5%), up to 90% LTV
• Bank 3: HELOC / 20 year / Prime + 0.75% (4%), up to 90% LTV

Lesson 2: Influence what’s in your control

When refinancing a property, set up your appraisal for success.

• Pull comps
• Provide the appraiser information
• Provide before & after photos of the property
• Seed a target price (for them to hit)

Lesson 3: EVERYTHING is up for negotiation

• Rates; APR, points, etc
• Term
• “Minimum Requirements”

In this most recent deal the bank told me that I could not get the full 90% LTV because I had not yet had 12 months of "seasoning" and the could only loan up to the purchase price. It was 2 months from the 12 month ownership period. I asked the loan officers to go back to the underwriter and ask for an exception.

As a result I was able to go from a $130,000 line of credit to a $230,000 line of credit.

Current status of the project

• Closed on the loan
• Paid off my initial lines of credit
• Lowered interest rate and payment to 4% on a 20 year term
• Obtained an additional $50k to invest
• Have the option to extend credit line to $300k with a lower DTI ratio