All Forum Posts by: Account Closed

I'd say make sure you have at least a 10% contingency budget allowed for any unseen freeze damage to play it safe. Some lenders may even require that as a part of the rehab budget. 

I am hearing of this happening all over the country right now. That, along with the rising materials cost = not a great situation to be in. Time is money. I'd say don't settle on your contractor search. Make those extra few calls until you find someone who can do it in your timeframe. The other option, (not sure if is even a possibility) is YOU be the GC and hire out all the subs yourself to save on time (and money to pay a GC). Best of luck with your project! Are you planning on holding to rent out or flipping?

I just posted about this in another forum, so part of this is a copy and paste, but some great takeaways. For refinancing, each lender looks for their own set of guidelines to be met when it comes to their long term rental loan in regards to cash flow. They take into consideration taxes and insurance, in addition to the net income of the property, and formulate what's call the "DSCR" or debt service coverage ratio. This minimum ratio varies from lender to lender. I recommend contacting a lender and having a real conversation about your property. Provide them with the income and expense (taxes and insurance only), and a good lender should be able to let you know what your terms would look like based on the DSCR and your FICO score. Many lenders are lending up to 75% of the current property value these days. Assuming there's cash in the deal, you may be able to pay closing costs and take some cash out if you wanted to invest again.

I'm happy to connect and answer any of your financing questions. 

Answering your right off the bat question- Each lender looks for their own set of guidelines to be met when it comes to their long term rental loan (refinance) in regards to cash flow. They take into consideration taxes and insurance, in addition to the net income of the property, and formulate what's call the "DSCR" or debt service coverage ratio. This minimum ratio varies from lender to lender. There are free DSCR calculators that can be found online. Most lenders have a 1 or 1.10% min DSCR requirement (think of it as a cash flow requirement that will allow you to pay the mortgage, and have a good amount left for income.) This is the long winded answer- but the best idea is to contact a lender and have a real conversation. A good lender will help to answer all of your questions and even provide a "hypothetical" quote on a property if you are still in the kicking tires phase. The Lender will also let you know if the property debt services or not.

To avoid the taxes paid on a flip, you can do what's called a 1031 exchange and use the money to buy another investment property. The BRRRR method gets you the most bang for your buck because it's an asset that continues to pay you. Owning investment properties is "the new social security" as some people are saying. The best way to acquire them is buying ones that are below market standards and fixing it up to that new higher value. If there's cash in the deal, most lenders will set you up with a Long Term rental loan and give you the cash out, which you can then use for your next flip or BRRRR.

Hope this helps!

Next step is to scout out potential properties and get comps for what the property would be worth once completely renovated. Then the step after that is to find a lender who is proficient in BRRRR and have a real conversation with someone who can guide you on the proper next steps and costs/risk should you decide to make an offer on the property. Most lenders have two loan products which will be needed to accomplish the BRRRR method. The first loan is the "Purchase and Rehab" loan, and the second is the refinance loan which is called a "Long Term Rental" loan. Once you establish your lender and get terms in writing for the initial purchase and rehab loan, (most Hard Money lenders only require a few bits of information such as property address, purchase price, Rehab amount, ARV, FICO, cash on hand and experience level), request a pre-approval letter and make your offer! Also, a great next step if/when your offer gets accepted is to open an LLC if you have not done so already. Most Hard Money Lenders won't allow title to be vested in someone's personal name. If your offer gets accepted, a good lender will work with you daily to make sure all of the needed items for your loan are in before the appraisal comes back. If you've done your homework, then the appraisal should also reflect the initial "ARV" you provided, or somewhere along that line. Then you're ready to close and get to work!!!! 

I am always happy to connect and help answer any other questions you have. This can be intimidating at first, but also extremely rewarding. It's so important to establish a good "tribe" of professionals (cooperative components) that you will use for each transaction. Once you get good, it really is rinse and repeat! Hope this helped :)

Really it depends on what your future plans are. I know you already moved in, but it sounds like you could qualify for a for a hard money refi with rehab loan if you wanted to keep it as an investment property, but the kicker is you cannot live in the house at all, even if you're only there during renovations. You can refinance out of the hard money loan after renovations are complete and live in it, or keep it as a rental at that point with top notch rental income if you are doing a full renovation. If you are planning on living there indefinitely, then some hard money lenders offer a personal loan option which is basically a line of credit that you can use for anything. let's connect- always happy to lend advice!

I think a purchase and rehab loan (private money) is the way to go. I don't think conventional allows for that-(I was under the impression FHA had to be owner occupied.) anyway- best of luck and feel free to connect with me anytime!

Welcome Mark, and congrats on graduating soon! I agree with Jeff that BRRRR generally works for lower priced homes, however I do get many loan requests for more pricey homes with really good ARV potential. Try to connect with a local wholesaler for off market deals. Many of my borrowers tend to buy and hold in your area as well. Not sure how long you plan to stay in Denver, but that could be a possible option if BRRRR is not conducive to your area. Let's connect! Best of luck, and feel free to reach out anytime!

Sounds like you are already off to a great start as a newbie by being a part of BP and this amazing network of professionals in the field. The BRRRR method is one of the most popular methods that I get contacted about from investors all over the country. So many different places to start- The MLS is always good, but wholesalers can find you great deals, many of which can be off market (less competition). The key here also is to start making money off the bat by purchasing a home below market value. Also, its super important to have a lender that is familiar with the BRRRR method, one whom you can establish a long term relationship with that will get your loans closed quickly and efficiently. The last R in BRRRR is Repeat- Find a lender that helps you repeat this process over and over seamlessly. Find your "tribe" that helps you get to the finish line quickly. Your tribe can include, contractors and sub contractors, real estate agents, wholesalers, lenders, and other investors. Best of luck to you in your new venture!! Let's connect- always happy to help!