1st BRRRR Investment - When to look for refinance options?

[Doug Ford]

I close on my 1st residential single family property on July 6. I'm currently setting up rehab resources but I'd like to get some advise on when I should start looking for refinance options? now? After the close? After the Rehab is started/complete? Thanks

[Shiloh Lundahl]

@Doug Ford This is how you set it up so that you do not have to wait 6 months for seasoning. 

1. Find a property well below market value - say 160k and market value is 210k but it needs a little bit of work to make it rent ready, say 10k.

2. Buy the property for 210k with a 50k credit for rehab costs on both sides of the settlement statement.

3. Get a hard money loan for 130k to 150k (for whatever the hard money lender will loan you).

4. Get a private money loan that will bring the total loan amount up to 75 - 80% or what the ARV will be - depending on the percentage of what the bank will finance. Fix up the property to where it would appraise for 210k.

5. When you are finished and you get an appraisal, the appraiser can see that the property sales price recorded at 210k and the comps in the area support that sales price so the appraiser valise the property at 210k.

6. The bank then does not do a cash out refinance but the bank is willing to pay off your Loans up to either 75 or 80% (depending on the bank).

7. You now have a property with a loan at $157,500 to $168,000. With both sets of closing costs and hard money and private money costs. you may be all into your property 175k with the value being 210k and the total you have left into the property may be between $7,000 and $17,500. And you have just created 35k in equity and increase in net worth and it only takes a few months to do this.