All Forum Posts by: Priscilla C.

Can anyone explain how the downpayment works using the brrrr strategy.Like if I buy a house in cash and rehab and refinance it I would need to put a down payment on the house when I refinance or no?Would I just need to be prepared for closing costs correct?Then after I pull out cash I can use this money to buy another property correct?

Quote from @Jared McCullough:

Are they basing your Loan Value of what you paid for the house? I think that is the important aspect is appraised versus purchase value. It sounds like they are using your purchase value. A lot of people on here call it "After Repair" value this implying that there are substantial repairs. 

I just purchased a foreclosure that needs maybe $1k for some new carpet and a window. The house should appraise for $60-80k and I should be able to pull about $50k from .75 LTV. I bought the house for $22k if the bank was only using the $22k no way I would even bother investing in this model. I would just find someone willing to lend at appraised value and not purchase value.

 What website do you use to find properties for $22K may I ask?

Quote from @Matthew Becker:

It depends.  After you rehab it you should be able to get a loan with a 80% LVT.  So if it apprasies at $165K your loan would be for $132K.  

I am not sure where the $401 a month comes from.  Your payment will just be based on Taxes, insurance and the loan payment.  

Can you clarify?   

Ok going off of this example 

• Purchase Price: $100,000
• Rehab Costs: $50,000
• After Repair Value (ARV): $200,000
• 80% LTV: If a lender allows an 80% LTV, the investor can refinance for $160,000 (80% of $200,000).

So following this example would this mean my new mortgage is going to be based on $160,000 so let’s say for a 15 year loan I would be expecting to pay around $1,300 - $1,500 a month? I would not be paying a mortgage on the appraised value of $200,000 correct? yeah to clarify the $401 a month I just based it off a general search on a $50,000 mortgage…

Hi I have a question for those of you that have done the Brrrr method on a property.How does the mortgage look after you rehab a house you bought in cash?Like let’s say I get a house for $30,000 and it appraises for $165,000 would my new mortgage amount be based on the property that is now worth $165,000? So let’s say I get a 15 year mortgage at $1348 monthly would this be correct to anticipate for any properties I do the brrrr method on?I wouldn’t be offered a Mortgage at $401 a month because the property is valued more so I will have to pay more monthly right due to its current valued after the forced rehab?

Quote from @Benjamin Aaker:

Quote from @Priscilla C.:

Quote from @Benjamin Aaker:

Since you will be renting it out you should get a conventional loan. What would you do with your current residence if you planned on living in the new one to get an FHA loan?

Ok yeah we are thinking of getting an investment property loan so we can stay in our current home.If we did the FHA route we are considering on living in the new property for 1 year and then moving back into our old one after the year is up.We are curious if we would get a more favorable rate if we borrowed from our home equity to buy the investment property.Do you have any idea if many investors borrow from their home equity to get started?

Yes, you can get a HELOC on your primary residence. There are risks as you are tying up your primary residence in the project. Failing might mean losing your house. If you do want to go this route, make sure that the underwriting of the investment property pays back both its mortgage and the monthly HELOC. If it can't, then don't consider it.

I see yeah definitely risky most likely won’t go this route but will keep that in mind.Thank you for your advice!

Quote from @Zach Edelman:

You could also go DSCR if you're DTI does not qualify for a conventional loan and you'd still be at 20% down on DSCR. You can also partner up as well/have multiple people on the loan for down payment purposes!

Hm that is an option.Our DTI is very good so we would probably go the route of just doing a conventional loan or FHA.Do you know the cons to a DSCR loan?Would it be less favorable then a conventional loan or FHA?

Quote from @Konstantin Ginzburg:

@Priscilla C.

Either one of those options should work for you. It simply depends on your time frame, when you want to actually begin renting the property out short term, and what the loan terms are. A primary residence will most often provide more favorable loan terms so if you are willing to wait one year while you living in your new property and are comfortable with renting out your primary residence to a tenant, then getting something such as an FHA loan is a good strategy to minimize your upfront costs and hopefully get better loan terms. I would just take into account that a lower down payment will mean a higher monthly payment so be sure to run the numbers conservatively in order to ensure your STR revenue is able to carry your monthly payment with this higher mortgage cost.

I see.We want to start renting out the 2nd property right away.That definitely is an option.Do you know if many investors use their home equity to buy a property?Would that have more favorable loan terms?We are also considering an investment property loan so we could then stay in our current place and then rent out our 2nd property.Thats a good thing to keep in mind about STR revenue.How do you usually run your numbers and know what revenue to expect before buying a property?

Quote from @Benjamin Aaker:

Since you will be renting it out you should get a conventional loan. What would you do with your current residence if you planned on living in the new one to get an FHA loan?

Ok yeah we are thinking of getting an investment property loan so we can stay in our current home.If we did the FHA route we are considering on living in the new property for 1 year and then moving back into our old one after the year is up.We are curious if we would get a more favorable rate if we borrowed from our home equity to buy the investment property.Do you have any idea if many investors borrow from their home equity to get started?

Hi I am a current homeowner and want to get a 2nd property for short term rental.I am wondering what would be the best course of action in terms of getting a loan for an investment property.Would you recommend getting a FHA loan or other conventional loan and living in the property for 1 year before renting it out and then renting out our current home or getting an investment loan and start to rent out the investment property?We do not want to borrow our equity against our current home to fund the investment property so just looking for ideas on how we should go about doing this.Thank you in advance for your answers.