4 unit investment using cash out residence refinance - BRRR

[Lisa Beauchamp]

Hi Everyone!  

This is my first blog post so please be gentle with me.  :-)  I don't even know where to start so it's going to be long.  

I purchased my first 100% occupied 4 unit investment property for university housing on 3/23/16. I financed the project through Wells Fargo which required 25% down. I decided to refinance my house and pull out the equity which was an unintentional BRRR strategy.

I saw 4 unit rental property by the university selling for $215k with potential rents of $3600/month.  I researched the taxes, got an insurance quote, and then ran the numbers through the bigger pockets rental property calculator and thought this was a good deal.  However, I didn't have any money so I spoke to a colleague at work who has a few investment properties and he referred me to his contact at Wells Fargo.  I met with the loan officer before I even saw the property to see if I can get financing by simultaneously refinancing my house while purchasing the investment.  He was sure he could help me so I met the sellers agent at the house 2 hours later.  I had a bad experience with the agent who represented me on my home purchase, so I decided to use the sellers agent as I figured he would not cost me this deal.  I was happy with the property and put in an offer an hour later even though there was another offer on table and the property was listed as contingent.  I offered the full price of $215k and asked for $5k back at closing.  The agent told me not to worry as the other buyer was trying to negotiate way more than the seller wanted.  About 2 hours later I received the call the offer was accepted.  

I was back at the bank on Monday.  I did get other quotes for refinancing my house but the agent recommended I use a local bank as it's usually an easier process.  The agent did not recommend Wells Fargo and said they took too long, but I proved him wrong.  

About my home: I purchased my home back on 7/3/13 and it was abandoned for about 2 years when I bought the property. My first home purchase was a short sale and I had HUD financing. In CT, 1st time homeowners can purchase a property with no money down and no PMI by taking out the 2nd mortgage with (CHIF) CT Housing Investment Fund. I just made the income requirement to receive assistance and only paid closing costs to acquire my home which I borrowed from my 401k and used the little savings I had. The short sale was initially listed at $219k and my agent wanted me to negotiate down to $215k and that delayed the purchase significantly. I don't recommend fighting for a few dollars if you want a property. The short sale was already approved for $219k and was set to expire on July 4th. They did come back a couple of months later and approved the $215k in the dead of winter. By the time the approval came back the pipes froze in the house so there was more negotiating. It's a long story and a nightmare, but will tell it to anyone who wants to hear it. Anyway, all was fixed and I closed the day before the short sale expired thanks to me working directly with the sellers agent as my agent said I just had to sit on my a-- and wait. My boyfriend lives with me and worked as a contractor so he helped me over the past couple of years to slowly fix up our home. I purchased my home at $215k and the appraisal for the refinance came in at $330k. Plenty to purchase the investment. :-)

I closed both loans in about 7 weeks.  And... I paid nothing at closing.  In fact, I received a check back for the tenant deposits, the rental income for 3/23-3/31, and an additional $900 from the refinance.  All in I only paid the 1% deposit, 2 appraisals, one inspection, the credit reports, and the 1st year of property insurance for the rental property which came to $6600.  Luckily the refinance closing costs were deducted from cash out refinance and no closing costs were due for the purchase because of the $5k back from the seller.  It worked out perfectly.

So I Bought my home, Repaired most of the problems, Refinanced, and Repeated the process by buying another home, this time a rental property. On the down side to my happy ending, my company relocated to Houston at the end of March so I am looking for a job mainly so I can buy another property. It is much easier to finance when you have a job. They looked at my income and added the rental property income to my own for the purchase. The PITI for the rental is $1740 and the rental income is $3400 so they added another $1600/month to my income which helped me finance the deal. There were some hiccups after purchasing which I can discuss in another forum about what to look for in preexisting leases.

Thank you for reading my post and wishing you all great success.  Please feel free to ask me questions if you have any, but I'm still a newb.  :-)