My BRRR Success

[Bryan H.]

Super excited as I am closing on my cash out refi tomorrow.

In 2012 I bought a foreclosure in MI for $20k. I put $10k into it and it's renting for $975/mo. 

I attempted to do my cash out refi last year around this time and planned to use the money to finance 2 more rentals in MI.  So I worked with the loan originators to start the refi and loans for 2 properties, one $45k, the other  $47k.  The original house appraised at $80k, so I was getting $60k which would take care of down payments, closing costs etc. These properties rent for $875 each. My initial $30k invested would now get $2725/mo in rent.

Unfortunately I didn't find out until it was too late that the lender doesn't do a cash out refi when you have 5+ investment mortgages.  The cash out was my 5th so they wouldn't do it. I didn't have the cash in the bank for 2 purchases, so I either had to back out of the deals (and lose my money) or come up with the cash. I decided to take a loan against my 401k as my down payments. 

I am happy to say I finally found a lender that would do the cash out on my 5th rental and I can put the money back into my 401k, plus reserves into my bank account. 

Lessons for others

• BRRR works
• Be creative
• Keep reinvesting in your business
• Be persistent
• Buy low, refinance high
• Money can be made in Metro Detroit

[Chad Reidlinger]

Darrell D. I've been in the mortgage business for 15 years now. A few things to keep in mind. If you're looking to qualify for more properties make sure when you're filing your tax returns you're not taking losses on each property otherwise you're income will have to carry those losses. Also know a lender can add depreciation amounts back to net income/losses on each property to help the numbers. In addition when buying a new property a lender can use 75% of the proposed rents to help you qualify. I also have access to loans for investors where a lender doesn't look at the borrower's income. They simply base the ratios on the proposed rent versus the Piti of the subject property. This way the overall dti isn't an issue.