Query regarding BRRRR Strategy in Real Estate Investment

[Vemmanath Vasudevan]

Hi Everyone, Hope you all are safe and healthy. Just wanted to know more about BRRRR strategy. Anybody here who have done a successful one? Need some guidance on it. It is great to know that through a successful BRRRR you can pay back your loan & even pay yourself too and will have the property in your portfolio. But was wondering how do you manage the refinanced loan which you took from bank? You still have that to pay off right, any suggestions and information on it will be appreciated.

[Chris Baxter]

@David M. There are some subtle differences in lending in Canada. We have a dissociation of amortization and term; you can have a mortgage on a 5 year term with a 30 year amortization. When you refinance, you can work with your existing lender to extend the existing term on a new valuation at at defined LTV. You can also shop around for better terms and rates. We also don't really have $120k houses anymore. Our median house price is now >$700k https://www.cbc.ca/news/canada...

@Vemmanath Vasudevan talk to your lender to determine what LTV they will offer on a refi and, for multifamily, what cap rate they are using in their lending criteria. A simple example for single family residential

Buy house for $400k with 20% down (80% LTV)

Your down payment = $80k

Mortgage = $320k

Complete renovations / upgrades... after reno/rehab/repair value (ARV) = $500k

Lender may offer 80% LTV on the new value, or mortgage of $400k (although you are more likely to see decreased LTV on refi)

You can then move your original $80K to a new property and carry a higher mortgage against the existing property.

Good luck, and welcome to BP!