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