First BRRRR Investment Property

[Asa Ifill]

Hello everyone! I'm pursuing my goals of being financially free by using the BRRRR method. I'm a new/young investor from Huntsville, AL that would like to get into REI. All criticism needed, I want to soak up as much info as I can! Please respond!

I have been researching the best loans to get for my first investment opportunity and my first thought is to use a Fannie Mae HomeStyle Renovation Loan to cover the cost of the property and the rehabbing.

I’m looking to spend no more than $70k on a property and $30k for the rehab, so ultimately, I’ll be getting a Fannie Mae Loan at 3% since I am a first time home buyer.

I’ve chosen the Fannie Mae Loan simply because they will give you a loan on your property PLUS the rehab costs with as little to 3% down. Also, you can find your own licensed contractors to help with the budget.

All criticism welcomed!

[Todd Rasmussen]

@Asa Ifill

Tenants cannot fulfill the one year requirement. Those loan programs are designed to help homebuyers get into properties. They do not care that someone is in the home for a year, they are looking for you to be in the home for a year. It still might be a good choice for you. Since you are planning to BRRRR, when you cash out refinance at the end, you would just pull 80% equity (less your existing loans) and refi with a standard cash out mortgage and no longer be committed to the requirements of your low down payment program? Intention probably has a lot to do with whether or not it counts, so even the scenario I just posed will probably not pass a couple introductory questions from a lender; but go ask and that way you'll know.

Using a lender to finance the renovations can have it's own hardships, like inspections before payments are released. You should also make sure you will meet underwriting guidelines after you purchase the property. Convincing a bank to give you ten of thousands of dollars more than what you just paid for something can be tricky, especially as the last financing step will give you the highest DTI ratio. I learned a lot buying my first three properties and have learned even more since I started to BRRRR. A misstep in the beginning can have devastating consequences to your ability to repeat, so make sure you educate yourself as thoroughly to avoid as many pitfalls as possible. Keeping asking questions, we'll be here.