All Forum Posts by: Eyal Goren

First, let's be very clear here.

The mortgage your speaking of is a private agreement between the seller and the lender. The "due on sale" clause (DoSC) obligates the seller to notify the lender if the property is sold.

Failing to do so would place the seller in violation of this agreement, giving the lender the right to accelerate the loan.

But no laws are being broken here.

So, subto is neither legal nor illegal.

Second, it only works because most lenders are more interested in receiving payments than in invoking the DoSC clause and foreclosing on the property.

But, it can work, provided seller and buyer are both on board and the proper process is followed.

Is there a specific reason you want a DFW based lender?

For many investors, your example is an excellent buy-and-hold strategy. Buying one every few years could lead to significant wealth over time

For a BRRRR strategy, consider Lower price points and older homes with more substantial rehabs and higher risk.

Example:

Purchase: $110k
Rehab: $30k
ARV: $170k
Rent: $1,450/month
Refinancing at 75% LTV:
  Cash-out refinance: $127.5k
  Funds left in the deal: $13k
Monthly PITI: $1,258
  You have $192 for maintenance and vacancy cost

It's not a perfect BRRRR but way less than the 20% ($34k) you'd put down on a turn-key investment. In this example, we invested $13k to create $30k in equity plus you own a break-even, renovated rental property while growing your net worth.

Some markets just don't pencil. But it's also heavily property dependent. If the property won't work for that amount, offer less. Or look elsewhere. I'm in Seattle and there haven't been real BRRRRs here in years haha

You're applying a BRRRR strategy to a turn-key rental house. There's no meat on the bone here. Heck, the a/c is brand new. The house in your example is prime for someone to put 25% down, have a $2000 month mortgage, and make $2400 in rent. That extra $400 covers maintenance, capex and vacancy.

So to answer your question, YES you are wrong. You can still BRRRR in this market but not when you're looking at a class A house that could rent for $2400 tomorrow.