#154

Have you heard of the BRRRR strategy but still have questions? In this week's video I show all the details of a BRRRR property that we completed. These are real numbers and should answer any questions you have! Enjoy!
Note: There was another $3,200 in miscellaneous fees (doc fees, title prep, etc.) that I didn't mention from the bank during the refinance. Therefore the math is $128,000 - $96,200 - $5,000 - $3,200 = $23,600.
******************************************************************************
Subscribe to our channel for more Buy & Hold Real Estate Investor tips!
/ emersonpropertymanagem...
Check out our FREE Rental Property Tools for Investors!
emersonpropert...
Sign up for our weekly email packed with useful info for Investors!
eepurl.com/g9plAX
Be our Facebook friend!
/ emersonpropertymanagem...

[@AP-yl9fz]

Having difficulty validating these numbers Purchase price = 96,200 Rehab = 13,000 Closing Costs = 5000 Misc (called out in comments below) = 3,200 All in Costs(sum of everything above) = 117,400 ARV = 160,000 Bank Loan = 128,000 Bank Loan 128,000 All In = 117,400 Cashback = 10,600 your help would be much appreciated. Thanks!

[@emersonpm]

Thanks for putting this all together! You're 100% correct. I labeled the "Cashback" of $23,600 as what I received from the title company, but this isn't necessarily the NET proceeds received. The net proceeds are exactly what you mentioned above $10,600 or $23,600 - $13,000 in rehab costs that I paid for out of pocket. Does that make sense?

[@miguelmontrell996]

Tip: I know it’s been years.....but PLEASE GETVA TRI- POD SET YOUR DRY ERASE BOARD ON, numbers already written out! Great content and info.

[@emersonpm]

Appreciate the feedback! Will do!

[@briz6368]

Soon you said couple dozen rental properties in a few years you got my attention brother

[@emersonpm]

It can definitely be done!

[@malindagillespie8722]

You are the first person to really explain BRRRR. I finally saw how you are adding properties to your portfolio and making a profit....Good looks!

[@emersonpm]

Thank you! Glad it helped!

[@yungog2o3]

@@emersonpm hey i was thinking about investing in real estate i have 250k to play with should i buy a place cash fix it up and flip or should i sit on it take out a loan against the property and buy more properties?

[@emersonpm]

@@yungog2o3 Great question! It depends on your situation and your goals. How many properties do you want to buy?

[@yungog2o3]

@@emersonpm im young 27 years old and i just recently quit my job to pursue real estate my goal is to sell 3 or 4 properties a year to fix them up and sell it i have contractors on stand by waiting and i have a realtor to help me look for properties

[@emersonpm]

@@yungog2o3 If all of that is true, then it sounds like you have a great start with a lot of options.

[@SnickerToInvest]

So many days and weeks on trying to figure out how to get the Ltv. This whole time it’s just 80% of the arv (appraised value) of the house. Thank you for this video

[@emersonpm]

Happy to help!

[@emersonpm]

Happy to help!

[@gurzilla666]

I dont get the 23600??

[@zyonjones7790]

Cash back from loan

[@emersonpm]

Sorry for the confusion! There was another $3,200 in miscellaneous fees (doc fees, title prep, etc.) that I didn't mention from the bank during the refinance. So, it's $128,000 - $96,200 - $5,000 - $3,200 = $23,600 Does that make sense?

[@barebeauty_yogi]

@@emersonpm what about the repair costs? I got 10,600 in net return or did you subtract closing costs twice?

[@Sam71914]

I understand the math but the whole concept of this is what I am trying to really grasp. PLEASE CORRECT ME WHERE I'M WRONG: 1. You find a property which is under market value/discounted 2. You find a private lender or anyone who can put down all the funds needed 3. After repair/rehab you get a new value to the property so it's called the ARV 4. Refinance with a 70%-80% LTV 5. Now is the "loan" actually a loan? Here is where it confuses me a bit. The bank is loaning you $128k for this property? You made the property valued at $160k so during the refinance the bank says "here is $128k for you to borrow", is this correct? There is $32k equity here. Is this being leveraged as if it's your down payment? Is this the whole point of the BRRRR? I mean there is no money out of pocket from you. Is this the whole point? Using your example: the ARV was $160k, majority of that piece goes to pay back the private lender or whoever initially funded the beginning process (purchase price, repairs, closing/interest). At the end, you have $5,600 cash. Consequently, BRRRR allows you to start a rental property without having all the funds in the beginning. It's like the traditional method but without the $$$ from your own pocket. The trick is to find a cheap property that needs rehab and having another individual/entity pay the total costs initially. Then they get paid back after refinance via the LOAN due to an ARV. The extra cash left is yours plus a new cash flowing property.

[@emersonpm]

Did you get the information you were looking for?

[@mohanshivdasani2885]

Great deal! The big issue is current interest rates are at7%! Though to get a positive cast flow at current rates

[@emersonpm]

True! Are you looking for cash flow day 1?

[@ViralmediaAi]

When you refinance to conventional or whatever, do they require 10-20% down or do they consider the equity ($160,000-$128,000=$32,000) your down/collateral/skin in the game?

[@MrsStevenBrown]

Nick Orozco the equity is your DP, it’s technically a fancy Heloc/ mortgage loan, some banks will make part of it a heloc, part a mortgage, do research into equity mortgages and heloc...a mortgage for the 80% can be broken into 15% mortgage and 65% heloc. Now this is important...as you pay it down the mortgage part is paid and than you have an open heloc on the property.. that credit line is now the emergency fund for that property, and in the future you can use that money if need be. Please do more research before jumping into them, there are many books and videos about this type of equity finances for real estate. Good luck!

[@emersonpm]

Great question! You're correct - the lender considers the equity in the property your collateral. Hope that helps!

[@gillespietransport1482]

How long did you hold the property before you refinanced it? Did you refinance right away? How much did you put down when you bought the property?

[@emersonpm]

Great questions! I refinanced in 2-3 months, which was as soon as I could. I didn't have to put any money down, but I used my own money for the repairs ($13,000). Does that make sense?

[@zaccheausmokua8503]

Great strategy Cameron! This is the exact method that I aim to get into buy and hold investing with. Question for you, did you obtain a pre-approval from the credit union prior to purchasing the deal to make sure it does actually refinance after the repairs and rental? Also, were there any costs associated with the refinance? Thanks for sharing these videos!

[@ViralmediaAi]

As far as the standard closing costs go can those be rolled into the loan? For example, if there are 5k in closing costs and they are lending 80% of ARV/market value on 100k, would they allow me to take a loan of 85k to roll in those 5k? Thanks in advance!

[@emersonpm]

I definitely spoke with the credit union first. There are normal closing costs associated with the refinance, so make sure to account for that in your calculations. BRRRR has been a fantastic strategy!

[@Mimi33948]

@@emersonpm If you do this over and over would there be a problem with income to debt ratio and they you wouldn’t get approved for the refinance?

[@TOMMY-WANT-WINGY]

Thank you for this. God Bless you

[@emersonpm]

Glad to help!

[@jakea6837]

Fantastic video. It really helps to see the numbers, thanks!!

[@emersonpm]

Thanks Jake! You think you feel more comfortable doing a BRRRR after watching the video?

[@jakea6837]

@@emersonpm yes absolutely. More knowledge increases confidence.

[@emersonpm]

@@jakea6837 awesome!

[@jonathansantiagorei]

I am having trouble understanding where that "Cashback $23,600" is coming from, could you clarify how exactly you got that number?

[@emersonpm]

Great question! There was another $3,200 in miscellaneous fees (doc fees, title prep, etc.) that I didn't mention from the bank during the refinance. So, it's $128,000 - $96,200 - $5,000 - $3,200 = $23,600 Does that make sense?

[@jonathansantiagorei]

@@emersonpm It does thank you for clarifying.

[@juanbolivar35]

@@emersonpm what about the closing costs? why they aren't here? Thanks

[@emersonpm]

@@juanbolivar35 Great question! Sorry I left them off for clarity. There was $3,200 in miscellaneous closing costs (doc fees, title prep, etc.) that I didn't mention from the bank during the refinance. So, it's $128,000 - $96,200 - $5,000 - $3,200 = $23,600

[@juanbolivar35]

Emerson Property Management, Inc. thanks for answering, and why the repair costs aren’t listed?

[@u2fkeys665]

I'm all cash (no loan) and from my understanding one of the best ways to get a discounted property is a court auction sale (all cash buy) after fixing it up and renting it what should the investor do to practice the brrr method, refinance?

[@u2fkeys665]

Sir?

[@emersonpm]

Yes, to follow the BRRRR simply do the following: Buy at the right price Rehab the property Rent to a quality tenant Refinance into great long term financing Repeat with the next deal Did that help?

[@u2fkeys665]

@@emersonpm yes sir thanks

[@speakintruthsince88]

Wait to clarify: Did you walk away with $23k in your pocket to scale? Or $5,600 exactly? Trying to figure out how do you actually scale with a BRRR

[@emersonpm]

Hey Jared, thanks for the question and sorry for not making it clear. $23,600 is what I received at closing but after paying closing costs and myself back for my out of pocket expenses, I actually made $5,600 net. Does that make sense?

[@speakintruthsince88]

@@emersonpm Yes, I got it. So say this was your very first deal on your portfolio. You will then be able to REPEAT with another property? I'm thinking with the BRRR it takes an avg 2-4yrs to receive your investment back based on annual rental totals?

[@emersonpm]

Yes sir, you can definitely repeat! You just need to find another great deal and find a bank that doesn't have a long seasoning period. Finding the deals is the hardest part

[@tb808]

Good strategy but those monthly returns are low. One eviction and you’ve lost all your annual returns

[@emersonpm]

True but I got a house with no money out of pocket. And how much do you think it's worth today?

[@djspock5150]

Ok don’t shoot me but there wasnt there a time in the early 80s if I am not mistaken where the banks called on all the notes. So if you have a bunch of properties that are not paid in full, you would be on the hook to pay them all then as they are not traditional mortgages and essentially spiral you into bankruptcy?

[@emersonpm]

Good point! Banks do have a clause that allows them to call your note due almost anytime they want (this happened in 2008). But this risk is not only for BRRRR investors but to anyone who has a mortgage. If your bank calls your note due, then you would need to refinance with another bank, which most likely wouldn't be an issue as long as you have enough equity in the property. Does that make sense?

[@djspock5150]

Thank you was just curious on the full risk imposed

[@emersonpm]

@@djspock5150 definitely risk! But it's no more than a normal high LTV loan. Best of luck!

[@YeButtonGaming]

Thank you for this information. I'm listening to the BRRRr book right now but seeing #s helps out a lot

[@emersonpm]

Glad it was helpful! You think you'll try a BRRRR for your first deal?

[@YeButtonGaming]

@@emersonpm Yes, that's the plan

[@emersonpm]

@@YeButtonGaming Awesome! It's a great way to get started! Best of luck!

[@joeycrunkilton4218]

How are you refinancing before closing? You haven’t even done repairs?

[@emersonpm]

Great question! I didn't refinance prior to the repairs but started the refinancing process almost immediately after the initial purchase because the refi process takes 30-45 days. Does that make sense?

[@AllegedlySpiffy]

What if you had purchased the home with 20% down ($24k), spent the same on closing and renovations, then refinanced at the new value ($160K)? You should come out with roughly $20k, no? Which you could then use to purchase another deal with 20% down?

[@emersonpm]

Yes, the problem is the sellers wanted to close ASAP so I couldn't wait 30-45 days to close conventionally with 20% down. But you definitely could do that!

[@AllegedlySpiffy]

So you have to ask your private lender/hard money lender (if it wasn't your own) for that ~$96k back so you can buy another deal...?

[@AllegedlySpiffy]

Emerson House Buyers awesome thank you for the response!

[@emersonpm]

Yes sir!

[@lakepressureandsoftwashing3102]

Fantastic way of explaining the strategy. But everyone that explains this method is forgetting to add we’re do you get the money from to rehab it yes u explained we’re to get the money from to buy it. I think if someone explain that part hands down you will have the best explanation video out there. Most speak of getting the money to buy the house hard money lender investor so on and so forth but no one I have watch hundreds of videos and no one has said well you got to go get a loan to rehab it well you have to go back and ask their investor for more money I think it needs to be addressed how to get the rehab money

[@emersonpm]

Definitely! It's easy for new investors to get mislead on how to get the rehab money! The BRRRR is a great strategy but it's not the only strategy and it shouldn't be used in all situations. Thanks for your comment!

[@coachyamyam9666]

You still need to pay the credit union back, right? Are you renting the property out now?

[@emersonpm]

Yes, there's still a mortgage, but the property currently rents at $1,600/mo and has been providing cash flow and appreciation since I purchased it

[@karlavelazquez7741]

I am confused and maybe you can help me clear it up. So you borrowed money from a lender for the purchase plus repairs and closing costs then you refinanced it and with the loan from the bank you paid the lender back but what happens with the loan from the back? Do you pay that back later with another house?

[@emersonpm]

Yes, you still end up with a loan on the property from the bank. The biggest difference from buying the property conventionally is you can reduce (or eliminate) your down payment, thus being able to buy more properties more quickly. You pay the loan back just like you would any other mortgage. Does that make sense?

[@karlavelazquez7741]

Emerson Property Management, Inc. okay so you would pay the bank loan from the monthly payment for the rental?

[@emersonpm]

@@karlavelazquez7741 Exactly!

[@karlavelazquez7741]

Emerson Property Management, Inc. thanks for clarifying!

[@emersonpm]

@@karlavelazquez7741 Glad to help!

[@PapasTTU]

What type of return will a private money lender want so they’ll loan you $96k? Assuming they’d like to profit off it.

[@emersonpm]

It all depends. Most of the PMLs I have dealt with like 10-20% return.

[@tiag298]

What type if loan did you go back and get? A refinance? How long did you have to wait to refinance?

[@emersonpm]

Yup, a cash-out refinance. At the time there was no seasoning period. Now, 6 months seems to be common. You thinking of BRRRing?

[@tiag298]

@@emersonpm yeah. I put all my capital on a down for my first property. Now I need cap for my next move. 😩

[@emersonpm]

@@tiag298 I feel your pain! Been there! Do you have enough equity to pull out some of your capital?

[@tiag298]

@@emersonpm I put down 25K on a 95K. Probably paid about 5k from rent. Maybe not.

[@emersonpm]

@@tiag298 95k ARV or purchase price?

[@oracioflores9664]

Curious how long did this process take from the time you bought the house at a discount to rehab to finally refinancing? Also what are the credit score implications of doing this strategy every so many months?

[@oracioflores9664]

@@emersonpm That definitely sounds doable. But what about credit score? Or does it not affect your personal credit score because the refi is under your organization name?

[@oracioflores9664]

@@emersonpm Ah! That makes perfect sense! Thank you for valuable insight you have provided for a newbie like me.

[@emersonpm]

Hope you're doing well Oracio!

[@jaredthomas6136]

It would be helpful if you made the second mortgage or refinance more clear. I think I understood up until that point. So you’re saying you walk away with $5,600 and you still have a loan which would be the second loan? Just curious. Helpful video nonetheless!

[@emersonpm]

Thanks for the feedback Jared! Yes, my first loan was with private money, then my second loan (which paid off the first loan) was with a bank. The difference between the second loan and the first loan, after all closing costs, was $5,600. Does that make more sense?

[@Fabi.29]

Okay, the video explained perfectly what you did and what to look for in a BRRRR. My question is what would you do if you only had 20% for a down payment and get a loan for 80% of the house, how would the numbers play in a role in that? When you Refi. would you add the 80%, repairs and closing cost and then subtract that from the ARV?

[@Fabi.29]

Yes thank you!!

[@emersonpm]

Hey Fabian, were you able to do a BRRRR?

[@manpatel6984]

Is this how the BRRRR method works ? I am a newbie so can someone help? Amount you buy it for is $100,000 ARV is $180,000 Closing Cost and Rehab is 30,000 Appraisal $135,00 Now you rent the property ( I don’t know after how long do we refinance ) and then you refinance it and get $135,000 ( going to the bank and the appraisal thing ). Now the $135,000 covers the amount you bought the property for, Closing Cost and Rehab and then you will have $5000 left. Is that how you use the BRRRR method? If I am wrong can you explain it in simple terms to me?

[@emersonpm]

Hey Patel, thanks for your question. In your example you state the appraisal is $135,000. The appraisal post renovation should be the same as your ARV. The simplest way to explain it is you buy a property below market value with hard money then renovate it to raise the value. After which, you refinance with a bank that will loan you money on the new higher value. What part are you having trouble with?

[@manpatel6984]

@@emersonpm I don't understand what do I do with the money I get after I renovate? Also I don't understand how it increase the equity of you property.

[@codywestbrook5318]

Assuming good cash flow and a positive outlook on holding a property as longterm rental, what kind of offer, in terms of profit, makes you consider selling? And what does that balance of pros vs cons look like in detail?

[@emersonpm]

Great question Cody! The truth is it really depends on the seller and their situation. A seller that just bought the property is going to have different motivations for selling vs a seller that's owned the property for 30 years. Good news - find the sellers that value convenience over price - that's how you get a deal! Did that answer your question?

[@codywestbrook5318]

@@emersonpm Thanks for the response! I'll try to be a little more clear. A partner and I recently purchased a single family and plan to hold long term but are getting many people asking if we are interested in selling. In the vein of there 'being a price for everything' vs. value holding long term I was hoping to get a little insight weighing the situation -- So for example -- You've recently purchased something you intend to hold long term and a buyer comes along willing to offer any amount of money. How would you weigh the value of holding long term against the profitability of flipping to decide on a number at which to sell? I understand it's all relative and many different variables at play I'm just lost on how to weigh the situation to respond to these prospective buyers. Hope that clears it up, and again thanks for your time!

[@joselima5842]

What were the "repairs" for 13,000? Interior pant?

[@emersonpm]

It was cosmetic - paint, carpet, appliances, hardware, etc

[@micahrmorgan11]

1. Doesn’t this destroy your net to income ratio after a few mortgages being on your credit? 2. Isn’t it possible to only have 10 mortgages on your credit?

[@emersonpm]

Micah, these are great questions that have been asked by other folks! The short answers are no and no but I'm going to do a video with more details. Stay tuned!

[@nickfazzio5277]

Subscribed thanks for the video

[@emersonpm]

For sure!

[@edmandell3064]

Great Video. What type of financing did you use to secure the deal? What. was your down payment?

[@emersonpm]

Hey Ed, my initial loan was private money then did a cash out refinance so I had no money in the deal! Does that make sense?

[@biskit_55]

When you refinance after renovation do you get a 30 year fixed rate or a 15 year fixed rate? And as long as the tenant pays rent and does not destroy property this would work great it would be my luck first tenants would not pay and destroy it.

[@emersonpm]

Thanks for the comment Tammy! I would get a 30 year fixed rate loan. You can always make extra payments to the principle. Check out my other video on 15 yr vs 30 yr mortgages kzbin.info/www/bejne/Z3-zlXumh5aWe9U Enjoy!

[@briz6368]

Hey man id like to have seen you go into detail about how much it rents for and how much you're leftover with cashflow after mortgage and expenses per month

[@emersonpm]

Thanks for the feedback! I'll make sure to include in another video!

[@warriorpoet297]

So how long do you wait before you get a loan against the house? And I also don't see where you accounted for interest on the original loan. Unless you threw that in with the $5000 closing costs and such. I mean, if I get a private loan, they're going to want a return on their investment. Seems like that could potentially wipe out your $5600 net. But I may very well be wrong. I'm genuinely curious and in the process of learning all of this.

[@emersonpm]

Hey Kevin, thanks for your question. When you can refinance really depends on your lender. Some lenders require a 6 month seasoning period while some do not. If they require a seasoning period, then you'll have to wait until the seasoning period is over to refi. As far as the private money - yes, the interest was included in that number. Did that answer your questions?

[@warriorpoet297]

@@emersonpm Yes, that answered my questions. Thanks so much!

[@krobertlazar]

How do you finance the initial $92600? It would be good to know the risks in this approach as well.

[@emersonpm]

Great point! Besides finding the deal, this is the most important step. There are many ways to find a lender for the initial purchase. See my lending playlist with numerous strategies you can use kzbin.info/aero/PLEUGW9mOSyn__V9-McsQhUScXjlsY1qUJ. Hope that helps!

[@bigwgmartinez6660]

Great video but the math is wrong but I get the idea thanks

[@emersonpm]

Did you check the comments?

[@itsbunic3856]

I have a question, if you don’t have the money to pay for renovating, do you just take out more money from the same lender you took the money to pay for the house initially?

[@emersonpm]

Great question! You're correct, if the deal is good, just borrow extra money from any resources you can!

[@itsbunic3856]

Emerson Property Management, Inc. I have one more question! This maybe a stupid question but I’m still learning, after you do the cash out refi does the bank take the loan from the lender you got at the beginning or do you have to go pay that money lender?

[@emersonpm]

@@itsbunic3856 It's definitely not a dumb question! The bank will do the refi through a title company like a normal purchase or sale. At that closing the bank will pay the lender (from the beginning) directly, and give you the proceeds. Did that make sense?

[@itsbunic3856]

Emerson Property Management, Inc. yes thank you so much, I’m a active duty military and is looking for something to do when I get out and this might just be it

[@emersonpm]

@@itsbunic3856 Thank you for your service! Real estate can be a fantastic career!

[@johncolisao8780]

What kind of loan do you have to get to cover purchase price and rehab? And what bank is good to go to?

[@emersonpm]

Hey John, you can go to any bank, private money or hard money lender for the purchase. You'll have to shop around your area to see who's best for what you're trying to do as each bank and person has different requirements. Where are you located?

[@achrafabouras2118]

Hey I'm sorry for my question I have something called dyscalculia, but hopefully if I understood this right. With the $23,600 you made back. That same money you just repeated the process over right?

[@emersonpm]

Correct! I used the money from my refinance to do the next deal. Then I just repeated the process over and over again. Have you done a BRRRR before?

[@achrafabouras2118]

@@emersonpm no I want to start but I can't get over my anxiety to buy my 1st rental property yet

[@Giselle-si2jy]

How many rental properties do you own?

[@emersonpm]

Great question! I own 31 units myself and we manage about 20 units for other investors.

[@lyricspencerbooks8467]

If you walk away with $5,600 that's not enough to buy the next property. How can you repeat?

[@emersonpm]

You're right! $5,600 on it's own isn't enough to purchase another rental. But if you have some savings (or know someone who does) then you can use that money to get started. Once you get the first few under your belt then it gets easier. Does that make sense?

[@lifeotr5934]

When you bought the house first time you had to have the money for down-payment and also for repairs correct?

[@emersonpm]

Great question! I used my money for the repairs but I used private money to purchase the home. Depending on your lender, there's a lot of flexibility on how you structure the deal. Any other questions?

[@user-em3ri6fy7r]

did your credit union make you wait 6 months to do a cashout refi?

[@emersonpm]

Thankfully no

[@leonardorodriguez-fw9vu]

Hey Man there something I don’t understand. So apart from the immediate profit of 5600 like you said. Whats the other benefit? Like is there a tenant that pays rent and you make the difference from the mortgage? Also after all of this you still legally own the home right? Thanks!

[@emersonpm]

Correct, the other benefit is you rent out the property and you definitely still legally own the home! Does that make sense?

[@leonardorodriguez-fw9vu]

@@emersonpm So basically you get the quick 5600 and you’re able to rent the property and you can use that rent to pay off the mortgage and might even make monthly positive cash flow if the rent payment you get is higher than the mortgage?

[@dameslife9473]

Do you have to go with a private lender or hard money for the initial purchase? Then use a bank after?

[@emersonpm]

Great question! Yes, most banks won't be able to close quick enough so you use a private lender or hard money lender initially, then refinance with a bank.

[@chandlermedley2439]

I understand the process but I’m having a hard time wrapping my head around you’re essentially refinancing your profit, your monthly payment increases several hundred dollars and therefore your rental monthly profit decreases. I like the idea of getting the cash but I’m struggling with the refi part. I also own 20+ properties but I’ve always paid the minimum 20% down and whatever rehab was came out of pocket.

[@chandlermedley2439]

To add to that you increased your debt by multiple thousands of dollars. Maybe this is me being caught in between personal finance Dave Ramsey mentality and investor business side.

[@bdm8960]

U put 20% down and the rehab came out of pocket? I’m new so could u please clarify for me?

[@emersonpm]

Thanks for the comment Chandler! Yes, the process was difficult for me to grasp as well. You're essentially pulling equity out of the improved property in the form of a loan. That's as basic as it gets.

[@emersonpm]

You're 100% correct. It's a struggle to determine whether to leverage or payoff the properties.

[@lsutigerphan5218]

I feel like the most challenging variable of rehabbing is an honest contractor. Any tips on finding one?

[@emersonpm]

Very true and great question! I'll put some things together and answer in a subsequent video. Stay tuned!

[@lsutigerphan5218]

@@emersonpm TY. I look forward to it.

[@marketopen3577]

How much money do you have to come to the closing table if you're using a hard money lender?

[@emersonpm]

It really depends on the deal. Some hard money lenders are 75% loan to cost (meaning you need to bring 25% to the table) while some are 75% loan to value (meaning if you buy a good enough deal, you bring nothing to the table). Does that make sense?

[@gviblog]

I always get confused with all this stuff srry so before any loan you had to put down 110,000 of your own money correct? Then it got appraised for a loan which covered it right?

[@emersonpm]

Thanks for the question Gabriel! The $110,000 can come from your own pocket or from any lender (I used a private money lender). Then you're correct - we got it appraised and the loan from the bank covered paying the private money lender. Did I explain that better?

[@gviblog]

Emerson Property Management, Inc. yes, got it thanks

[@forrealtyler]

please include how you calculated the purchase price! that is the biggest road block for newbies, incorrect calculations!

[@emersonpm]

Hey Tyler, are you asking to see the calculation I used to determine the property was a solid BRRRR deal at the purchase price?

[@BetterWorld0]

Wait wait wait this is gold. I’m a little lost , with the rental income every month obviously you have to make payments on the ($96,200) you go to a traditional bank and they give 80% of the ARV when you pay off the original loan aren’t you only paying the difference you owed on it ???

[@emersonpm]

Almost! You use the 80% ARV loan from the bank (128k in this example) to pay off the $96,200. Therefore your only loan payment when you're finished is the monthly mortgage payment on the 128k. The net monthly income is the rent minus your mortgage on the 128k, taxes, insurance, property management and repairs/maintenance. Does that make sense?

[@BetterWorld0]

@@emersonpm 👐🏾 Thank you

[@emersonpm]

Glad to help!

[@jeremysims5125]

Wouldn't you need to put a 20% down payment for the hard money loan. How did you get a loan for the entire purchase price? And did you pay for the closing costs, and repairs out of pocket initially, or did the hard money loan cover that as well? Also what numbers did you subtract to get 23,600 in cashback?

[@emersonpm]

Great questions Jeremy! Some HMLs require 20% down but my private money lender did not - he loaned me based on the ARV minus repairs. I paid for closing costs and repairs out of pocket because it was expensive to have the lender come inspect the jobs. There was another $3,200 in miscellaneous closing costs fees (doc fees, title prep, etc.) that I didn't mention from the bank during the refinance. So, it's $128,000 - $96,200 - $5,000 - $3,200 = $23,600. Did that all make sense?

[@home3.03]

Any way we can get a call and you can help me understand the process? Especially that I’m moving to the US and I don’t know what I’m qualified and not qualified for.

[@emersonpm]

For sure! First, what specifically are you having trouble understanding?

[@bentonbryant8207]

Just learning about this but wouldn't the initial loan of $96.2k have interest?

[@emersonpm]

Correct! The lender will charge you interest on the $96,200 - usually 8-12%.

[@edmandell3064]

@@emersonpm Is the 8% to 12% stated in the analysis?

[@Peakprospr420]

Hi got a question how do you assess if you have a good deal. Im a beginner. Iv found a deal fairly run down which has potential for appreciation after refurb. Any things to help me assess if its a good deal. I have another question which is, is it necessary to have a property surveyor to inspect the property. They charge roughly around 1-3k which i dont have. Thanks

[@emersonpm]

Have you locked down any deals?

[@kadenmullins7421]

So does the equity the house gains pay off the refinance? And you take the rent as profit?

[@emersonpm]

Exactly!

[@nickamendola1628]

Was there interest on your original 96,200?

[@emersonpm]

Yes, I paid 2 points and 10% interest

[@nickamendola1628]

So that’s an additional 9,620$ where does this get factored in?

[@emersonpm]

@@nickamendola1628 It's not quite that high because the 10% is an annual rate (meaning you only pay 10% if you hold the loan for a year). The lender fees are calculated into the closing costs and final cash back figure. Does that make sense?

[@nickamendola1628]

Yes it does thank you so much! I’m just about done saving and been doing a lot of homework! Going to try my first BRRRR! Thank you

[@emersonpm]

@@nickamendola1628 Awesome! Best of luck!

[@bmercer910]

How long did the refinance process take

[@emersonpm]

When I was doing it almost a decade ago, 2-3 months. Now there seems to be 6-12 month seasoning periods where the bank won't let you refi.

[@jordenramirez4614]

Is it really worth 5k profit in half a year ?

[@emersonpm]

Agreed, I wouldn't work for 5k for six months. But remember, at the end of the day I got paid to buy a rental property. Does that make sense?

[@kingfeemer1688]

I don't get how you get a loan bigger than the purchase price ????

[@emersonpm]

Glad to try to help! What part are you having trouble understanding?

[@MendandMake]

he is getting a loan for what it is now worth after being repaired ARV 1606(0.8) = 128,000

[@morionthomas7068]

Do we need a down payment for this method ?

[@emersonpm]

Hey Morion, it depends on how much below market value you purchase the property. If you can buy at ~75% of ARV including repairs you can get into the deal with no down payment. Does that make sense?

[@danerd9591]

How do I refinance with a hard money lender?

[@emersonpm]

Sorry, do you mean refinance from hard money to long term financing, or refinance from hard money to hard money?

[@avelinocastro3650]

How does people keep buying houses if you only stay with $5600 supposedly? Do you just get a whole new loan from a hard money lender ?

[@emersonpm]

Thanks for the question but I'm not sure I understand. Can you please ask it in a different way?

[@avelinocastro3650]

@@emersonpm okay so I got a couple of concerns, once you do a cash out refinance you pay everything you owe back right ? but you still owe the money to the bank. So how do you buy the next house ?Do you just get a whole new loan from the hard money lender ?

[@emersonpm]

@@avelinocastro3650 Correct, once you refinance you have to pay back whoever lent you the money to purchase the property (private money lender in this example). Then you'll have a loan with the bank ($128,000 in this example) which is being paid for with the rent from the tenant. There's no need to get another loan after the refinance. Did I explain that well?

[@avelinocastro3650]

@@emersonpm but if the 128,000 loan is for that specific house how do you go out and buy another house with it ? Do they let you use it where ever you want ? And out of those 128g don’t you have people to pay back ? so how would I have enough to money in the loan buy another house ? What if I had my own cash/money to buy/rehab a house which I do . Can I still do a cash out refinance?

[@emersonpm]

@@avelinocastro3650 the 128k from the refinance is collateralized by the rental but that doesn't mean you can't spend that money on other things. You can spend the money on anything you want, after you pay off the lenders and any liens ($96,200 in this example). Yes, if you pay cash you can still do a cash out refinance, and use the funds however you want.

[@dhirenpatel4079]

Hi great example but how much loan EMI going to be and rent we will get ??

[@emersonpm]

Thanks for the question! What is EMI?

[@dhirenpatel4079]

@@emersonpm from bank we are taking loan amount of 1,28,000$ so we have to pay monthly installment to repay a bank

[@emersonpm]

@@dhirenpatel4079 Correct! My apologies, the mortgage payment is $600/month and the current monthly rent is $1445.

[@time9533]

New to real estate like the strategy... If I closed on two properties three weeks apart.. seasonal period is six months can I refi each one once the time period hit?

[@emersonpm]

Great question! You'll be able to close each property once you've owned that property for more than six months. Does that make sense?

[@time9533]

Ok got it thanks thanks for the help and fast reply

[@emersonpm]

@@time9533 Glad to help!

[@time9533]

So after the refi did you have positive cash flow? Is it possible to get between 200-300 after cash out refi?

[@emersonpm]

@@time9533 Great question! For this property it was about $150/mo but your monthly cash flow after you refinance will depend on what you can rent the property for and how much cash you pull out on the refinance. If you want more cash flow then don't pull out as much cash on the refinance. Does that make sense?

[@jasmine6899k]

Could you run through this with an initial deposit/mortgage scenario?

[@emersonpm]

Thanks for the question but can you clarify? I'd love to help but I'm not exactly sure what you mean.

[@Rebecca-cy6ei]

If its the same question I have.... what did you use to buy the property with first? Where did that money come from? Did you have a loan for the $96,200 + 13000 for repairs?

[@emersonpm]

@@Rebecca-cy6ei On this deal, I used private money for the $96,200 purchase and paid for the $13,000 in repairs with my own cash, but you can buy with hard money or cash too. Does that make sense?

[@michaellacks9179]

Would love if the camera cut to you writing next time

[@emersonpm]

Noted. Thank you for the feedback!

[@TyroneBryant]

Why didnt you buy the property using the MAO formula? 50-60% of ARV, minus repairs and closing costs. $5600 for 6 months does not net enough $$$. You would have been better off selling the contract for $10,000 to an end buyer and moving on to the next deal??

[@emersonpm]

Hey Tyrone, thanks for the questions. I'm not familiar with the MAO formula. What is it? I kept this property because my goal is to build wealth, not active income. I was paid to buy this property that has $32,000 in equity, continues to appreciate and produce monthly cashflow. Why would I have given that up for $10,000?

[@briz6368]

Do you have any training course you offer online? I'm looking to be a huge investor someday and I want to start as soon as I leave the military which will be summer of 2021. Until then I'm researching and studying like hell and saving.

[@emersonpm]

Unfortunately I don't have anything to sell you online man! Hope you're still looking to start this summer!

[@RMURPHY2024]

Hello, how much you have to put down out of your pocket for that deal?

[@emersonpm]

Did you watch the video?

[@RMURPHY2024]

@@emersonpm yes I did

[@RMURPHY2024]

@@emersonpm is there a way of doing it without any money out of pocket?

[@emersonpm]

@@RMURPHY2024 you'll need to have some money to invest for 3-6 months but then you can get it back. IMO you need to have some money for when things inevitably go wrong. If you're not comfortable yet, then focus on increasing your income or decreasing your expenses.

[@RMURPHY2024]

@@emersonpm ok thanks...!!

[@jmb1215]

Great stuff thank you

[@emersonpm]

You're welcome! Have you used the BRRRR strategy to buy a rental?

[@philiposborn9141]

What hard money lenders do you recommend in Indiana ?

[@emersonpm]

Hey Philip, sorry but I only know lenders that operating in Texas and Ohio. Have you tried searching BiggerPockets approved list?

[@philiposborn9141]

@@emersonpm no I haven’t. I always feel that that forum is full of bunch of scammers..

[@ionisfoutaka6425]

math is done wrong near the end

[@emersonpm]

You're correct! Sorry about that! There was another $3,200 in miscellaneous fees (doc fees, title prep, etc.) that I didn't mention from the bank during the refinance. So, it's $128,000 - $96,200 - $5,000 - $3,200 = $23,600 Does that make sense?

[@ionisfoutaka6425]

@@emersonpm thank you, however it was lovely video and made brrrr real clear for me

[@emersonpm]

@@ionisfoutaka6425 My pleasure! Thank you!

[@jasminsaavedra3098]

This math is wrong

[@emersonpm]

Check the comments

[@amoreshaudakingsley5029]

he's all over the place. not a good teacher. at least keep the board in view

[@emersonpm]

Thanks for the feedback!