All Forum Posts by: Trevor Nace

Forced cashflow, through value add, in a high appreciating market. You can have your cake and eat it too, you just need to find the right property/where to look.

The cash for the rehab was mostly from cashflow from the property and we put in some additional cash, none of the rehab was using borrowed funds.

I own a 21 unit mixed-use property (60% apartments and 40% retail space) in a suburb of Denver. I've owned the property for 4 months and am positioned to finish a six-figure rehab on the property in a couple of months. At that time, the property will be in a good spot to do a cash-out refinance given the added value, increased rents, utility billback, and decreased expenses. However, I'm finding lenders require a 12-month to an 18-month seasoning period.

Can anyone recommend a lender or put me in contact with a lender in Denver that doesn't require a 12+ month seasoning period?

Thanks for the response Alex, the breakdown is 40% commercial, 60% apartments by square footage. I'm happy to hear of the options you know of that fit this type of property. 

I own a 21 unit mixed-use property (apartments and retail space) in Lakewood, CO (a suburb of Denver). I've owned the property for 4 months and am positioned to finish a six-figure rehab on the property in a couple of months. At that time, the property will be in a good spot to do a cash-out refinance given the added value, increased rents, utility billback, and decreased expenses. However, I'm finding lenders require a 12-month to an 18-month seasoning period.

Can anyone recommend a lender or put me in contact with a lender in Denver that doesn't require a 12+ month seasoning period?

Ahh, I think I got it now. In my calculations, I was assuming you pay off the refinance for the previous house but you leave each house with the refinance. I've put together a breakdown of a cash and mortgage example running through the 3rd house. 

Adding it here if it's helpful for anyone else to get a sense for what the picture looks like on the 2nd, 3rd house, etc.

Thanks Matt and Whitney for your help!

BRRR Cash Example

Home 1

Home: $55k cash

Rehab: $15k

ARV: $100k

Refinance 1 @ 75%: $75k

Home 2

Home: $55k using Refinance 1

Rehab: $15k using Refinance 1

ARV: $100k

Refinance 2 @75%, $75k

Status: 2 homes ARV of $200k, Refinance 1 & 2 outstanding for $150k

Home 3

Home: $55k using $ from Refinance 2

Rehab: $15k using $ from Refinance 2

ARV: $100k

Refinance 3 @ 75%: $75k

Status: $70k of your cash initially in, 3 homes ARV of $300k, Refinance 1, 2, & 3 outstanding for $225k

BRRRR Mortgage Example

Home 1

Home: $55k

Deposit: $11k

Mortgage 1: $44k

Rehab: $18k

ARV: $100k

Refinance 1 @ 75%: $75k

Home 2

Home: $55k

Deposit: $11k using Refinance 1

Mortgage 2: $44k

Rehab: $18k using Refinance 1

Leftover $ from Refinance 1 = $46k, payoff Mortgage 1

ARV: $100k

Refinance 2 @75%, $75k

Status: 2 homes ARV of $200k, Refinance 1 & 2 outstanding for $150k

Home 3

Home: $55k

Deposit: $11k using Refinance 2

Mortgage 3: $44k

Rehab: $18k using Refinance 2

Leftover $ from Refinance 2 = $46k, payoff Mortgage 2

ARV: $100k

Refinance 3 @ 75%: $75k

Status: $29k of your cash initially in, 3 homes with an ARV of $300k, debt from Refinance 1, 2, & 3 and mortgage 3 totaling $269k

Hi Whitney,

Thanks for the reply and good to hear you're nearby in Boulder, I'm in Lakewood!

To summarize:

Your cash in: $70k
New home appraised for $100k
Refinance for $75k

At the end, when you're ready to repeat you have $75k in cash (well $70k) to repeat. However, that $70k is not yours, you need to pay that back. So if you use the $70k to repeat then you will have the $75k refinance to pay back and the new mortgage on the 2nd house to pay back?

I don't see how this continues, am I missing something?

I'm new to all of this so bear with me if my assumptions, math, or understanding is incorrect. However, I don't see how the math works beyond the 2nd BRRRR house.

Using my assumptions in the spreadsheet, here is the outcome after the 2nd BRRRR house compared to a traditional method of just paying the 25% down and rehab costs out of pocket for the two homes.

Assumptions: Both houses bought at $100k with 25% down, $20k put into each house for rehab, refinanced at 75% of $160k ARV for each house.

BRRRR Method End Result: You invested $45k of your own money and bought 2 $100k houses, spent $40k on rehabbing both houses, you're in $195k debt and own 2 houses with an ARV of $320k.

Traditional Method End Result: You invested $90k of your own money and bought 2 $100k houses, spent $40k on rehabbing both houses, you're in $150k debt and own 2 houses with an ARV of $320k.

Is the whole point of BRRRR to buy 2 houses with less total personal cash invested and more leveraged? What I read about BRRR makes it seem like it can endlessly fuel new acquisitions.

Link to public Google Sheets with the spreadsheet here.

Thanks for bearing with me during a learning curve!