Welcome to every possibility podcast. A place for new investors to learn about investing, starting a business, and credit knowledge. Sit back, relax and let’s get the conversation started…
My name is Ameerah and our topic for today is…
How to Use Unsecured Financing for the BRRR Method
Before we even get started I have to throw a disclaimer out there. Any loan you get can put you at a financial risk. You are responsible for your own investments. Please do your due diligence. The scenario I am about to give is for educational purposes only.
So for the newbies who do not know what the BRRR method is. Let me break down the acronyms. The BRRR stands for Buy, Repair, Rent, and Refinance. Depending on who you talk to it can be Buy, Repair, Refinance and then Rent. However, it is still the same.
For those that are wanting rental properties then this may be an option for you. Usually, because you can pick up houses at a discounted price. You just need to put a little LTC in it and rent it out.
So you are wondering how unsecured financing can help with this method. If you are new and starting to talk with hard money lenders, commercial lenders, or think about getting a mortgage on a home that needs repair. You will find it harder to purchase because either 1. The price of the home is to low for the lender to even consider it or 2. They want a down payment aka skin in the game to purchase.
Well, what if you don’t have a down payment. Yes, you can save up the money or partner with someone to get the ball rolling. Those are all possibilities.
However, you are here to see how unsecured financing can be used for this method.
If you check one of my prior episodes. I told you what it would take to qualify. We can usually get you up to 5X more than a traditional bank all by leveraging your credit and income.
So if you have decent credit and you have verifiable income then let say you can get funded for $100,000 which is doable. Remember this is CASH in your bank account by leveraging your credit.
If you are using this method please begin with the end in mind and have the lender you are going to use ready to go with the refinance before you start anything. This way you know their requirements and that you meet them. We don’t want you scrambling to find someone because you did not plan ahead.
You find a home that needs some work and you were able to scoop it up for let say $50K. You were a smart investor like I know you are and you notice the prices for a fixed-up home are going for $120K in your area.
So after purchase and repair your total came out to be $90K all in.
You find a tenant. They move in and they are now paying you to rent about $1200 a month. It could be more or less depending on where you are. However, I will use the 1% rule for rent by using the ARV. If you can not follow me then I will leave a link to my site where you can see it broken down.
So here is the amazing part. You Purchased and Rehabbed and placed a tenant in your investment property all using NONE of your own money.
Let’s say you do a CASH OUT refinance. HINT you purchased the home using unsecured funds. There are no liens tied to the home! Depending on which lender you go to you may be able to get 80% LTV. Note some lenders may want a certain credit score or DTI requirements but there are others that will lend off the investment property itself.
Which would bring you to around $96K in cash-out refinancing. We are not going to talk about closing costs or lender fees.
So what does this mean to you?
I will repeat it again. You purchased a home using NONE of your own money. You have a tenant paying your mortgage and you have monthly cash flow.
AND you just got back $6,000 after refinancing.
I say WIN-WIN!
If this sounds confusing then please go to my site and look at the breakdown.
I hope you can see the potential in how you can use the funds to help you to your goal of financial freedom.
So until next time. I want you to have a good day, a good week and I will talk with you soon.
Thank you for taking the time out to listen to this podcast.
If you are interested in unsecured financing for your next business project you can reach out to us at www.everypossibility.net or give us a call at 469-722-1788. We would love to hear from you. But until then bye now…