All Forum Posts by: Account Closed

I had a goood experience with US bank. Everything was online, good rate, good LTV%, and they sent out a notary to wherever I wanted to sign the paperwork.

My wife sent me a TikTok Video that blew my mind. He outlines what essentially amounts to a BRRRR but with the caveat that the property is owned by his LLC and then sold to his wife. I assume this makes sense because the loan terms on a purchase are better than they are on a cash out refinance. Can anyone share any insight on this? I cant seem to find anything on this strategy from a mortgage lending, legal, or tax perspective.

Below is the link to the video 

https://www.tiktok.com/@mr_brr...

@Kevin Vandenboss how would you recommend going about getting a lease signed first before you have a building under contract? just an agreement on specs and price sq/ft? 

I am also in a very similar position and have been disappointed by the "paying off your mortgage is a waste of time" responses. 

Example: I have 70k mortgage at 5% interest on a condo worth around 120. 

I also have 70k+ in cash sitting around earning 0% waiting to be put to work (BRRRR, buy and hold, business, etc)

I take the 70k, pay off the mortgage, then immediately get a 90k HELOC (75% LTV) .

The way I see it, I've just created a 5% ROI "floor" in the sense that I can now put that HELOC cash to work when a good deal comes up, but if not, I will at least be hitting a 5% ROI based on the savings from not having a mortgage payment.

What am I missing here? 

@Ben Smith thank you for the post, I am struggling with the same question. Turnkey rentals and flips are relatively straight forward. However, I'm struggling to wrap my head around partnering on a BRRRR, Specifically how the partnership works in relation to the refinance. In my case, I am the money/W2 Employee/loan holder/deal finder/admin partner and I am looking to partner with an experienced General Contractor to fully manage the rehab aspect.

How does this typically work? As the money partner, I would like to recoup all of my cash investment. Then once the refi is complete, then the equity and cash flow are split 50/50? 

or perhaps I put in my 50% of the capital and then "loan" my partner his 50% of the capital, so that way once the refi comes through he pays me back? (and then puts in 50% of however much capital is still in the deal)? 

Any insight on what is "typical" would be much appreciated. 

Thank you!

@Brett Fitzgerald @Jake Thomas A bit late to this party, but I am looking to do my first BRRRR in the Kalamazoo area. Have you had any luck with lenders willing to do cashout refinances for BRRRR's (preferably with a short seasoning period)? Would either of you be willing to refer me? Thank you!

@David Barnett thank you for helping me think through this! The more I read about HELOC's, the more I like it. I could lock in the "good" appraisal value now, and have it available for the eventual downturn, without having to take on more debt until I actually need the cash.

@David Barnett the reason i used the "Technically my primary residence" is because I set it up so that I rent it from myself at the market rate, and then pocket the "cashflow". When I do the math on a Cash out Refi, it stilll cashflows and my my COC ROI goes up. Not sure if that changes the equation or not. But I will definitily do the comparative math between a cash out refi and a HELOC. Assuming I buy 1 property a year, it may make sense to just borrow from the HELOC for just a few months when necessary and pay it back quickly.

@David Barnett Since it is technically my primary residence, I aim to do an 80% LTV

Here is some napkin math:

Mortgate goes from 72k to 100k. Payment goes up $150 per month, so it cost me $1800 to hold that cash for a year. 

However, I plan to put that cash in a money market account paying 2.25%, so it would net out to only costing me around $1000 to hold that cash. 

So if the appraisal comes back even just 1% lower than anticipated next year, I've already "profited" by cashing out early. So in that case, I'm inclined to agree with your point. 

To support @Jake S.'s point, borrowing money just to sit on it seems kinda of silly, and people have been talking about real estate "cooling off" and "the next recession" for years and years now. Values could very well keep going up. 

I may be splitting hairs here, just trying to understand how experienced investors think about their cash. 

Hi @Jake S., Mostly to build up cash reserves from: 

1. Other Rental Property Casfhlow 2. W-2 Jobs 3. Cash Out Refi

Given my projections, I cant imagine being financially ready before then. 

Side Note: I'm not trying to time the market perfecty, BUT it sure seems very possible that by next summer we could be in a recession (there seem to be a lot of warning signs, inverted yeild curve, etc.) so I want to be prepared financailly to take advantage.