All Forum Posts by: Jimmy Lieu

lets go!!! thanks so much! feels amazing to finally understand the BRRR method :D

bump

I am primarily confused with how to get my money out to repeat the process.

Let's say I use HML and put 20% down on a 100k property so I get an 80k loan from the HML. The rehab cost is 50k borrowed from HML. The closing/holding cost is $7.5k. The ARV is 250k.

With the 250k ARV, I can take 75% out in a refinance ($187,500). With the refinance, I will need to subtract out the initial 80k loan, 50k rehab cost, holding/costing costs, and the HML interest.

187.5k - 80k - 50k - 7.5k - (HML interest) = $50k

The 50k is remaining is the cash I can pull out from the refinance process and use for my next property. With the current 250K ARV property, I have 25% equity in it and I am gradually paying off the mortgage by renting it out correct?

Is everything I have stated here correct?

Thanks so much in advance.

Hi Jonathan,

Still a bit new to real estate but what is it about refinancing that would be difficult? With those two properties, you are bringing in monthly cash flow so why would you sell?

Or is it because you believe properties are so hot right now that you want to sell at the peak of the market?

Thanks so much!

Hi,

I am new to offer letters but I was wondering why you put your requirement of needing at least an 8% return on any personal cash you've invested. Because you only have a financing contingency, what is the purpose of stating the numbers and your ROI?

Just a bit confused! Thanks.

Hi Christopher,

I am relatively new to the BRRRR process too. Are you able to explain why you cannot use conventional financing with the BRRRR method?

If you did 20% down on a 100K property and then did a 10K rehab and then property is now appraised for $150k. Let's say the holding/closing costs is 10K total.

The entire cost is 20K + 10K + 10K = 40K

Can't I do a cash out refi from the ARV 150K? Let's say I can pull out 70% which would be 105K. 105K - 80K in loans = 25K. Does that mean I can pull out 25K with my refinance?

I understand I still have the 40K I still did not take out so technically, I am still having 15K of equity in the property after the refi.

But my question is that if I did a refinance with my example above, would I be able to pull out 25K if I wanted to?

Sorry, I am still trying to understand this process as well.

Hi Bridgetta,

Wow, what a great answer. Thank you so much for helping answer my question and that definitely clarified things a lot for me. I guess I had the words repair and cosmetic fixes mixed up. I meant to only write about cosmetic issues only. Yes, I would 100% repair anything that is broken and make sure everything is functioning as it should be. My question definitely only was pertaining to cosmetic issues.

You answered my questions really well! Some examples could be like the interior painting doesn't look to amazing or kitchen cabinets seem a bit outdated. As stated in your answer, you would fix these cosmetic issues then to get top rent?

However, where do you draw the line? How would you know whether to go for the $75 chandelier or the $500 chandelier?

Also, I don't want to overimprove the property as I've heard that's not the best thing to do.

Thanks so much.

Hi,

I recently just learned about umbrella insurance. I was wondering, if I am about to start my house hacking journey, should I have an umbrella insurance or LLC or both? Or should I not have anything at all?

I want to sign up for an LLC but some people have said lenders don't really like giving loans out to LLCs? So I am really conflicted on what to do.

How do I know if fixing a cosmetic issue or doing a specific rehab would increase the rental value of a property?

For example, after I close a property, I will be fixing everything on the inspection list. However, inspectors don't report on cosmetic issues. Because of this, I will be bringing in contractors to find the cosmetic issues and write itemized bids for how much it would take to fix.

My question is how would I know if fixing a cosmetic issue would increase the rental value of a property? Some people I've talked to have said that they will only do a repair if it will increase cosmetic issue or reduce turnover. My question is how would you know that?

Or is it one of those things that you need to look at other rentals in the area and see what type of finishes they have and match them?

This is a great question, I want to know more about this as well.