Originally posted by @Travis Fairbairn:
Originally posted by @Jesse Byrer:
@M T Naughton in my opinion buying cash is the wrong way to do the BRRRR Strategy. The best way to do this is work backwards. When you find a property you like.
Step 1 - Figure out how much it’s with all “fixed up”.
Step 2 - Get an accurate idea of how much it will cost to fix it up
Step 3 - Take 75% of the “fixed up” value minus the “cost to fix up”. That is the number you’ll want to offer.
If the offer is accepted you’ll want a loan for 100% of or 75% of the future value.
What this allows you to do, and the main reason you want a loan vs. paying cash. Is once the rehab work is done you no longer have to wait 6 months (there will be no waiting period), but you’ll also get a lower interest rate on your final loan because you’ll be now being doing a rate and term refinance instead of a cash-out refinance. It’s different and rates are higher on a c/o refi.
I'm a lender and a BRRRR investor and 100% believe this is the best way to quickly build a real estate portfolio.
Good luck!!!
@Jesse Byrer I'm confused by what you are saying here. I'm very intrigued. My understanding is that the reason people pay cash/get private/hard money for the BRRRR project is because a traditional lender will not lend on a property at the distress level that a lot of people are looking for in a BRRRR. Is this true? Or are you saying to find a less distressed property that a lender will still lend on?
Travis, i am aware of the proper way to do the BRRRR. the reason i paid cash for this deal is the cost was so low, and the potential was so great, i didnt want to pass on it. so i paid cash thinking finding a mortgage of $35-40k on a house valued at $70k w renters, would be fairly easy. I will continue to search, but i didnt expect it to be as difficult as it has been. I think the first 3 deals are the hardest, to build a relationship w a lender, than the next 10 will be. Back to work
