All Forum Posts by: Jordan Mummau

@Daniel Hennek you obviously have some lending experience! I appreciate the comments. It was specifically the Equifax that seems to fluctuate significantly while transunion and experion hadn’t moved. It’s been my experience most lenders will average the three but I suppose it is possible that they pick the lowest when refinancing.

@John Desmet as others have mentioned, I would use the money to buy properties rather than paying down/off student debt. Student debt can be described as “bad debt” as it’s not tied to an asset that makes you money (Think Rich Dad Poor Dad). However, if you run your numbers and you can invest in a property which returns equal to or greater than the interest on your student loans, it just makes mathematical sense. Not to mention increasing equity, net worth and paying down good debt. All things you miss by taking the money to payoff the student loans. There are always caveats which may include being bankable due to debt/income ratio. If you don’t qualify for a mortgage based on the amount of student loans you have compared to your income, then your question is answered for you.

@Daniel Hennek Thanks for the feedback. I have a mix between secured and unsecured lines. The secured lines tend to be less expensive to use so I usually start with those. I agree on the 50 percent rule. That's initially my concern as I anticipate going over 50% for two or three months. The numbers work and therefore I don't mind pulling the money, just wondering if there are other ways to access short term funding. Ironically, out of the three scores, it's just the FICO that seems to be affected. 

BP Community,

Looking for some help on this topic. I'm currently winding down a flip that I have $100K+ into holding on a personal line. I just went under contract on a Duplex (Cash Buy) and scheduled to close by end of the year that will be a BRRRR and hold rental. The duplex, all in is going to require $135K in cash after purchase and reno. I have the funds to hold both. The issue I have is drawing on my personal LOC's for this extended period of time is pulling down my Credit Score. I've done similar transactions before using my LOC and the C.S jumps right back up after payoff but I'd like to look for other options to possibly finance the duplex through hard/private money. Any idea's or comments or creative thinking would be greatly appreciated! If there is anyone local to the Central PA area that wants to fund all or part of the debt on the duplex for 3.5 months + points and fair interest, let me know!

For refinancing purposes. In it's simplest form, the only calculation you need for a perfect BRRRR is to ensure your after repair costs are 75% of your after repair value. That's it.

Your cash flow is going to be a totally separate calculation. 

When you move, you can find loan products that will allow 3-5% money down, if your goal is to pull as much as possible in a cash out refinance. The BRRRR process will typically require 20 to 25% LTV. So you must be laser focused, realistic and do a lot of homework on the ARV of the property you're BRRRR'ing. The ARV will make or break your deal. If your numbers work, you can get 100%+ of the money invested in your BRRRR deal to go ahead and do it again.

This is by far my favorite method to buy real estate. It's not a difficult process to understand however, the process can be complex. Each piece of the BRRRR has it's own level of complexity and can take a long time depending on circumstances. Having said this, you also want to be prepared to have your cash you put in the deal being held in a property until completion of the first three phases of BRRRR.

What are these complexities? Well for starters, if it's a multi tenant building and your goal is to rehab the property, it's important to check current leases. If the tenants are on an annual lease, and they still have 6 months it's going to be difficult to start rehabbing each unit. There are creative ways around this, one being offering options for tenants to agree to terminate leases early, etc but it's something to consider when analyzing these deals. Evictions also take time. Secondly, calculating the cost and time of rehab have it's own set of challenges. Finding contractors, getting estimates, knowing exactly what you need done vs what you'd like to have done in order to maximize each penny. Renting, Refinancing all have their unique challenges as well. 

It's undoubtedly one of the fastest and reproducible ways to gain wealth that I'm aware of and it's something that I think every investor should be doing. However, you should do a lot of homework scrutinizing each piece of the method in order to know you've got a good BRRRR deal.

Refinancing may not be the best route. It's going to reset your amortization schedule and even though you may be paying lower APR, you'll be paying more interest and less principal. Additionally, often times closing costs are incurred on a refinance so you have to run your numbers to see if it really makes sense to lower a point or two.

Additionally, it's important to have a best guess as to how long you intend to keep the property. If you plan on keeping it over the course of 30 years, then a lower rate may make sense over the long haul but it's rare people keep properties that long. 

I'd ask myself what my goal is by refinancing. To simply lower your interest rate, depending on how many points and over what period of time may not actually save you money. If you're doing it to pull cash out of the property you'd need to analyze how much cash you'll be able to pull vs the costs of refinancing. 

Investment Info:

Single-family residence buy & hold investment in Annville.

Purchase price: $390,000
Cash invested: $90,000

Primary residence. Purchased after using bridge loan on our first flip primary residence. Purchased for 100K under market and have added additional value over the next couple years of ownership. Serves as our flagship investing platform through the use of an interest only HELOC.

I can’t tell you how many offers I’ve made, even on properties that have been on the market forever. 99.9% of the time the selling agent will ALWAYS say there’s another offer coming or at a minimum another interested party. It’s not always untrue either, as a selling agent they’re going to go back to every other single person that showed the least bit of interest and let them know it’s their last shot to get in. Sometimes this does result in a competitive offer. However, in most cases, it never materializes or the competitive offer doesn’t have as good of terms. If you make an offer and it’s truly your highest and best, put your head in the sand! Stay emotionless through the process and you’ll make better business decisions!

@Masa N. As some others have stated above, in my experience if you go portfolio you shouldn't have much of an issue as long as the property is currently rented, cash flows well above PITI and you have signed annual leases in place. With limited documents to support proof of income, job, etc. They may require a higher LTV. If the property is cash flowing properly, you'll get a loan on it, just a matter of what LTV the lender is comfortable with considering no work or income history. Which will ultimately dictate how successful your BRRRR becomes. You should be able to get LTV estimates based on your credentials before submitting for the loan itself.