BRRRRing investment properties is the most powerful and fastest-scaling strategy I have seen to date - it's awesome that you're breaking it down so that everyone has access to the same information. The playing field has been levelled - now time to play ball!
Finally I have been able to make sense of the BRRRR method! I could not wrap my head around it until now and I'm learning a lot form the comments! Thank you!!!
can someone explain me this? So, I got 64000 in my hands but I also have a mortgage of 160,000? So, if I do that with a lot of property I would have a lot of mortgage, right? Also another question, how much equity do you have in that example? 6:08
Ok I see one problem with this. Say you buy a house that needs work as you show in your example and as is the home would cash flow $100, after fixing it would cash flow for $300 (No refi). But now you go refi so you can get the equity, the problem is your payment would go up making the property be back at a cash flow of only $100. I know that now you can go buy another property and say the other property cash flows for another $100, now your total cash flow with 2 properties is $200. If you would have just done the original remodel without refinancing you would have a higher cash flow. So to me, it looks like maybe overtime your net worth MIGHT go up faster through the fact that having more homes would mean more assets getting inflated prices which you could than see whenever you wanted, but this is as some high risk potential.
Life changing advice. You do an awesome job with your videos Matt, it's a pleasure to follow you. Look forward to using this strategy with impending deals to come. Thanks for sharing!!
Hello, the part that I don't get is that you've started with a Mortgage of 96k and now you have a new Mortgage of 160K ??? How good is that. Sorry for not understanding that step. Will appreciate if you could break that down for easier understanding and the Pros on that.
Thanks for the video! The only comment I would make is that single-family residential properties (even up to 4 units) won't be valued on a cap rate, but on a gross rent multiplier (GRM). Cap rates are used on bigger multi-family properties, and other commercial properties. (Im an appraiser)
Nice explanation! But what happens with the months of the mortgage payment you need to pay while you are working on the renovations. It is this not important for the calculations? Thanks for all the information that you share with us
Quick question do you usually renovate the property yourself or get contractors to do that work for you? Also are you going with conventional loan to get the property or a 403k rehab loan.
Thanx dude, this clarified a lot to me, got my second property! Im following your guys BRRRR strategy but the laws are slightly different on this side the jungle pertaining to interest rates on mortgage loans, but this strategy is still so very do able!! For information, you deliver the message across to me better then the other guys and girls out there. Its going BRRRR here in South Africa but not because its cold but because we investing right!!!!
Bro you are a freaking genius... well I know that it doesn’t take rocket science but a little explaining is all I need keep the content coming I’m subscribed 😂 thanks bro game over!!!!
Just to make sure I'm understanding this.. Your initial investment is 54k. Once all is said and done and you re-finance, you withdraw the new equity as a loan for 64k. Therefore you have profited 10k. How do you pay back the new higher mortgage without eating up your profits - just by selling the place? So let's say you sell for the 200k you got appraised at - that means you pay back the 160k, and walk away with an additional 40k. So in total; your ROI is 50k? (40k from the sale, 10k from the Re-fi) Am I on the right track or am I missing something?
These properties still meet the 1% rule so even with the refi they still Cashflow every month - been getting a bunch of similar comments recently so I’ll do a video on it soon
This is a good video can you do one that shows what type of financing you use to make this happen. Are these FHA loans or are you using traditional loans or hard money?
@@RehabWithEhab hi so if you use hard money to purchase the property then once you mortgage it after its rented. Will the bank give you the total asset worth in cash?
Thanks for the great videos Matt! Very clear lesson on BRRRR method. Only question I would have, and I think it is an important one, you don't seem to have included closing costs to purchase (legal, appraisal fee, home inspection, etc.) nor the holding costs (mortgage interest, tax, insurance, utilities). This would impact your final net worth figure you came out with once refinanced. Still a great method of course, just your profit would not be quite as juicy. Thanks!
Hi Paul - There are small costs incurred - though during the refinance and initial purchase - the bank pays for appraisal, and I don't do a home inspection (inspect it myself) but on the initial purchase you're right that there is legal costs (about $1600). Just for the sake of simplicity, I focused on the big puzzle pieces. (Hard to keep these videos from ballooning from 5-15min into 20-30min videos.) Thanks for watching and for sharing your perspective!
@@CanadianRealEstateChannel I recently inquired while refinancing my home outside of Montreal this month and if you refinance while in negotiations to renew, the bank pays for the home evaluation or appraiser but once you sign a deal with the bank and then decide to refinance, the property owner pays for the appraiser. Also the costs of cancelling a deal with a bank to refi are high. Btw, as of last year my bank does not do 35 year mortgages, 30 years max and you cannot change the amortization from a short one to a longer one anymore.
Dont you have a penalty when you refinance a typical loan before the 5 year period is up? Or are you getting a 1year financing loan on your rental properties?
It really depends on what mortgage you get. We usually will either use an improvements plus mortgage (no penalty type of mortgage), an open mortgage, or a 6-1year mortgage depending on the exact project etc. (Some of these options you'll pay a higher interest rate, but it's only for a few months so not a big issue - and you factor that into your cost analysis on the project) thanks for watching!
I hear ya and I understand the strategy, thank you... but what are the risks? Bank not agreeing with your valuation is the only one I can think of. Are there others?
+Morad Al-Muhandes hi Morad - it really does depend on your exact situation/technique. I have been getting a lot of similar questions - I’ll try and have a video shortly on this topic.
Yes, but if the property cash flows after the refi - you’re making money every month and paying down the new mortgage and can go buy another property and repeat the process
So amazing to see how you've grown your subscribers from 2.5K to now well over 61K 🙂 #Respect Wishing you all the best as another fellow Canadian youtuber 🙏🎬
I live in Ontario too, I'm beginning to invest in real estate in Nova Scotia. I'm debating between buying personally or incorporated. I'm leaning towards personally because I would need a mortgage then possibly transfer to a corporation title afterwards? How would you start?
I am so happy see someone in another Canadian market having so much success with the BRRR strategy. I work with Sandy MacKay, the cofounder of the Breakthrough Real Estate Investing Podcast, I'd love to see you on it sometime to share all of this knowledge. So nice to have another resource focused on Canadian real estate investing!
Moguls in the Making, Whats the exact name of the podcast? I'm just north of Montreal and looking for Canadian realestate content to help guide me as I start this journey.
Moguls in the Making, Whats the exact name of the podcast? I'm just north of Montreal and looking for Canadian realestate content to help guide me as I start this journey.
Thanks for another great video. I think last week the assumption was that you initially bought the property in an all-cash transaction and refinanced once before repeating the strategy. Here, you technically apply for a loan/mortgage twice. I always enjoy listening to CPAs and T-accounts :)
Haha - that's exactly what crossed my mind when I was doing this exercise - T-accounts hadn't used them in a while though. 😂 thanks for watching & commenting!
Omg this video is great. Thank you for breaking it down. Curious to know if anyone uses the Brrrr method by purchasing the property with cash and then mortgage it after its rented?
Hi Matt, We were in a weird situation when returning to Toronto- we wanted a house in a particular area. The area was too expensive. Instead we ended up with a triplex. Luckily the house went up in value. What the bRRRR system does not acknowledge is that prices may tumble. And you ignore the debt column. That net worth could evaporate in a situation where the overall market falls. And if rents fall with that, you would not be able to keep up with payments. We are lucky- we bought at 1.2mil, it was worth as high as 2.1mil, and now has probably fallen back to 1.8. We put 250k into repairs (basement, asbestos, electricity, kitchens, bathrooms, etc.). If it fell to 1mil , a big dip that could happen with interest rates, we will not be able to afford the house as 1) rents would decrease and 2) renegotiating the mortgage at significantly higher rates could make payments and upkeep become unaffordable. The odd thing is we wanted a home and this was the best deal we could find. A single condo or home was only a little less. If we had re-fi'd at 2million we definitely would have taken some money out but the investment itself would go to hell...and we would likely walk away from it if prices fell 25%. If we had invested in another property with the refi proceeds, we definitely would be sunk. Also...you live in Canada. You know what deficits all levels of government are running. There will be increasing political pressure to "make the rich pay". See the CBC today. We escaped major problems, but it is just a matter of time before taxes get ratcheted up on property to pay for "free stuff". www.cbc.ca/news/canada/toronto/toronto-budget-2018-property-taxes-1.4529258 Be careful out there! And thanks for your vids. Victor.
Great video! One question for you. When you go to the bank to refi the property, do you take out a home owners line of credit or a Home Owners Ready Line (will have to discharge our current mortgage as we have only had it for 7 months). Thanks! Kristyn
How do you get banks to cut a mortgage note that’s worth the original value plus even money or greater on your renovations? Banks here see through upgrades and fix ups and basically quote mortgages based off assessed property taxes which don’t fluctuate much, especially due to upgrades.
great video and cleared the BRRRR up for me - question though on the ARV - how are you forecasting it, and what calculations are banks using to revalue the property based on rental income / refurbishments? e.g. if you increase rent by $500 does that = a certain $$$k?
This might be a dumb question, but i just want to have a clear understanding. But the rental income pays for the monthly mortgage payment (after refi), allowing you to break even on that am I right?
I totally understand this method, but the money you got from cash out refinancing, does that go into an account or can you only use that whole amount for the down payment on the next property? If that’s true then I’d have to raise more money for renovations correct? Or could you use half for down payment then half for renovation?
Great video. but, if you refinance the Monthly Mortgage goes up right? So lets say I do have someone in that property and the value from RENO shoots up. Now the Monthly Mortgage shoots up by 300 and I'm renting 350 over the mortgage. ill be making less per month, however I will have more capitol on hand to purchase more properties. am I correct? so is this BRRRR method wise? when the conditions contains tight numbers in terms of profit?
Hey Matt, i am a big fan of your channel and am based in Edmonton looking to BRRRR. Im curious what rate your orginial 80% mortgage is. Once you refinance the property do you typically do that through the same institution as you got your initial mortgage? and what is the new rate you are at once it's refinanced? what is the typical seasoning period for an appraiser to come and allow you to re-fi in YOUR market. Thanks!
When you cash out refinance and use the money as downpayment, you still need to get a new mortgage to pay for the rest of the cost of buying your new property. How does that impact the affordability for your new mortgage? I am really intrigued by the video and love to give it a try. Appreciate a response. Thanks from a fellow investor from Canada 🙂
Hey Matt, I am here in Winnipeg Canada, what is your opinion on the market here for the BRRR method? Where did you learn all this? Did you take a class? I am interested in doing this.
Thank you for your video Matt. It's mind blowig stuff! You mentioned in the video that there should be a market where this strategy would work within 4-5 hours drive from where we live. Do you have more information on this or could you let me know where I can find information on this? I currently live in Edmonton, but am willing to move to a bigger city (Vancouver, GTA areas) eventually. Thank you in advance for your time Matt.
Lin Xu yea your mortgage goes up and your tenants pay it in the form of rent, and if you’ve done it correctly you still have a little bit of cash flow left from their rent after you pay your mortgage and expenses each month
Hi Matt! I just wanted to say I love your videos! I just had a question with regards to the refi process. What type of mortgage do you recommend using for the BRRRR strategy? I was thinking a “mortgage plus improvements” mortgage, but when I talked with my broker, he indicated no matter what type of mortgage you get, you’re going to pay penalties once you refi the property to take out the equity to buy another property because you’re essentially breaking the term whether it be variable or fixed?Is there ways to avoid paying the penalties to maximizing the equity profits? And what types of mortgages do you use and what terms on BRRR properties? Thanks so much for your videos, they are so incredibly inspiring!
Hi Mitchell! I use the improvements plus mortgage (sometimes) and incur no costs/breaking fees. Alternatively your bank can register the mortgage at a higher amount so that in the future if you wish to refi you will not incur any legal fees etc. There are a lot of nuances to all this - but in general there should be strategies to avoid any breaking fees etc or to get the bank to waive them. If you ask the question multiple times and keep getting the same answer, either change the people your asking the question to, or change the way you're framing the question. Hope that helps and thanks for watching!
Hey Matt great video! I do have a question, how do you factor in if you would do this or not? Do you look at what the new mortgage will be at the higher level and see if it will still cash flow? If it will not cash flow positive will you still do the refi to get the cash to move on to the new property. Also with the Fed starting to raise interest rates do you think the mortgage rates will go up also and effect the BRRRR strategy? Thanks once again for the super informative videos!
Hi Chris - yes ensuring it cash flows is important to me. I aim to have it between .7-1% rule after refi, which means it usually is Cashflow neutral or positive
The $64,000 figure confused me, but let me see if I understand this part right. The new ARV is $200k, and the 80% cash out for that would be $160k. However, you still have to repay the original mortgage (before rehab) that was $96k (80% of the original $120k buy price), so $160k - $94k = $64,000. Is that correct? Is that where that figure comes from?
I’m wondering if you take out a hard loan for the initial purchase what I have to get another loan for the refinancing aspect and then take the additional income from the new loan and pay off the old one?
Hi Matt, Can you explain, where the closing costs expenses are, how much the before and after rental costs would need to be and if you need to wait till end of 1st term to re-fi or pay the costs of the appraisal yourself? Thanks.
Hi Matt, great video. However, what if you bought a condo that doesn’t need any “rehabbing”, thereby eliminating one “R” from the BRRR, how are you able to yield an increase on your project? In other words (using your numbers) you wouldn’t get back $64,000...wouldn’t you only be able to get back the $54,000 that you started with? So would or could the BRRR strategy still work? Thanks.
I think it’s important to note that BRRRR investing should be calculated conservatively as if the refinance was only going to be 70-75%LTV. Those are more common and should be used to initially find your purchase price.
Depending on how tight your liquidity is (if one or even a couple refinances going wrong over extends you) then playing things safer is wise; like a lot of things it really depends on the situation and how you approach it - I perhaps don't make clear in my videos that often when I'm discussing my ARV it's a relatively conservative number - (Only once have I not got my expected or higher appraisal) - thanks for watching and commenting! I really appreciate it.
How do you meet 43% DTI ratio when this repeating this process , especially when owning primary house mortgage. As far as I know, when calculating DTI , the rental income will only be added into gross income after 2 years.... so does that mean repeating this process every 2 years?
I've been watching your videos for the past days and this seems a nice way to make money but I still have a question. Now, I'm not from the US, I live in Eastern Europe and I do not know if this process you describe can be applied here too. My question is what happens with the interest from the first loan. Usually banks will give you, for example, $160k and you are responsible for paying way more than that (let's say $330k), within the next 30 years. So I do understand that by getting a second mortgage you actually will have that $160k to pay the first loan, but that's just the principal part. You will still have to pay the interest and somehow that was not the deal with the bank since you are accountable for paying way more than $160k, over a period of 30 years.
Great video to clear things up with simple to follow numbers...however after you refi you will not get all 64k back in cash from the bank... please explain why you think the bank will allow you to take all your equity "cash" out
Hi Tod - as I state in the video - the bank will allow you an 80% loan to value, allowing you to access 80% of the total equity. So if you had a 96K mortgage and bank determined the property was worth 200K they would allow you to access the 64K (ie 160K total). There may be small fees that reduce the total, but for simplicity sake, you do get access to the 64K in this example. This is an investing strategy I, as well as many other investors I know, use on a regular basis - and accessing 80% of the equity is a very common occurrence. Hope that helps
Bro I didn't understand anything when I watched for the first time. It was like hard math... But watched it again and again. And now I can explain it as well. Thanks man
So you are talking about bank financing, right? and Do you have a video doing the same process with private investing. I'm trying to get my first rental property. Good info thanks
BRRRRing investment properties is the most powerful and fastest-scaling strategy I have seen to date - it's awesome that you're breaking it down so that everyone has access to the same information. The playing field has been levelled - now time to play ball!
Finally I have been able to make sense of the BRRRR method! I could not wrap my head around it until now and I'm learning a lot form the comments! Thank you!!!
I LOL'ed at the Hedonic Adaptation
😂😂😂- I need that subscriber and share fix now - I blame you for getting me hooked on it Graham.
can someone explain me this? So, I got 64000 in my hands but I also have a mortgage of 160,000? So, if I do that with a lot of property I would have a lot of mortgage, right? Also another question, how much equity do you have in that example? 6:08
@@manpatel6984 also there are taxes implications for the profitsfrom the rent. Probably they are incorporated.
Hate to see this video so late as so many opportunities have been wasted. Glad that i finally understand how it works now. Thanks a lot!
Watched many videos on BRRRR - this is by far the most comprehensive through showing totals in each metric. Thank you
Love this comment Brendan!
This is easily the best explained video on UA-cam. I love the way you broke it down
Great video. Only thing missing is the interest when refinancing.
Ok I see one problem with this. Say you buy a house that needs work as you show in your example and as is the home would cash flow $100, after fixing it would cash flow for $300 (No refi). But now you go refi so you can get the equity, the problem is your payment would go up making the property be back at a cash flow of only $100. I know that now you can go buy another property and say the other property cash flows for another $100, now your total cash flow with 2 properties is $200. If you would have just done the original remodel without refinancing you would have a higher cash flow. So to me, it looks like maybe overtime your net worth MIGHT go up faster through the fact that having more homes would mean more assets getting inflated prices which you could than see whenever you wanted, but this is as some high risk potential.
Life changing advice. You do an awesome job with your videos Matt, it's a pleasure to follow you. Look forward to using this strategy with impending deals to come. Thanks for sharing!!
Thanks Isaac! Once you start implementing - let me know - I'd love to hear from people who's lives were impacted by my videos!
Hello, the part that I don't get is that you've started with a Mortgage of 96k and now you have a new Mortgage of 160K ??? How good is that. Sorry for not understanding that step. Will appreciate if you could break that down for easier understanding and the Pros on that.
Thanks for the video! The only comment I would make is that single-family residential properties (even up to 4 units) won't be valued on a cap rate, but on a gross rent multiplier (GRM). Cap rates are used on bigger multi-family properties, and other commercial properties. (Im an appraiser)
Good to see you have gotten more subs since than. You deserve it!
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Nice explanation! But what happens with the months of the mortgage payment you need to pay while you are working on the renovations. It is this not important for the calculations? Thanks for all the information that you share with us
Man you shouldn't have cut the video so many times during the edit, too hard to follow
I agree I was like wtf very hard to follow and fathom it, shit teaching style but your comment has made me see it’s also the editing style that’s shit
So the key to this is buying rough, run down properties in good areas that COULD be commanding a lot more rent with a rehab
Renaldo - Yes that's the ideal situation/profile of property you want.
Are you refinancing in an LLC or in your name then deed the property to the LLC?
Quick question do you usually renovate the property yourself or get contractors to do that work for you? Also are you going with conventional loan to get the property or a 403k rehab loan.
Thanx dude, this clarified a lot to me, got my second property! Im following your guys BRRRR strategy but the laws are slightly different on this side the jungle pertaining to interest rates on mortgage loans, but this strategy is still so very do able!! For information, you deliver the message across to me better then the other guys and girls out there. Its going BRRRR here in South Africa but not because its cold but because we investing right!!!!
Haha that's awesome! Thanks for sharing your story! That's awesome that you're doing it in South Africa!
I lowered speed to 0.75x and you were still talking fast, lol
Lol i increased to 1.25×. More like my preferred speed. Though admittedly he speaks fast generally speaking 😛
Speed it up, time is money!! Ahah
@@DoseOfVirality Absolutely!
Bro you are a freaking genius... well I know that it doesn’t take rocket science but a little explaining is all I need keep the content coming I’m subscribed 😂
thanks bro game over!!!!
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How important is that net worth? Would you get more loan or something if your net worth is high enough?
In this scenario about how much would the payment be on the refinance and how much cash flow would there be after property taxes and insurance
Question- My mortgage company told me I couldn't refinance a rental company? What would you do?
Get a different mortgage company
What about closing costs? Do you have to pay those twice (initial purchase and refinance)? How does that affect the numbers?
this is perfect man. Anyone who cant follow this video shouldnt be worried about properties to begin with. Super simplistic and easy to understand
Thanks! Appreciate the support in the comments!
How does the refinance change the original mortgage repayments?
Just to make sure I'm understanding this..
Your initial investment is 54k. Once all is said and done and you re-finance, you withdraw the new equity as a loan for 64k. Therefore you have profited 10k.
How do you pay back the new higher mortgage without eating up your profits - just by selling the place?
So let's say you sell for the 200k you got appraised at - that means you pay back the 160k, and walk away with an additional 40k.
So in total; your ROI is 50k? (40k from the sale, 10k from the Re-fi)
Am I on the right track or am I missing something?
These properties still meet the 1% rule so even with the refi they still Cashflow every month - been getting a bunch of similar comments recently so I’ll do a video on it soon
This is a good video can you do one that shows what type of financing you use to make this happen. Are these FHA loans or are you using traditional loans or hard money?
Typically hard money to buy and rehab and then refinance into a conventional or portfolio loan.
@@RehabWithEhab hi so if you use hard money to purchase the property then once you mortgage it after its rented. Will the bank give you the total asset worth in cash?
But how easy is it to actually refinance with banks considering your TDI
Thanks for the great videos Matt! Very clear lesson on BRRRR method. Only question I would have, and I think it is an important one, you don't seem to have included closing costs to purchase (legal, appraisal fee, home inspection, etc.) nor the holding costs (mortgage interest, tax, insurance, utilities). This would impact your final net worth figure you came out with once refinanced. Still a great method of course, just your profit would not be quite as juicy. Thanks!
Hi Paul - There are small costs incurred - though during the refinance and initial purchase - the bank pays for appraisal, and I don't do a home inspection (inspect it myself) but on the initial purchase you're right that there is legal costs (about $1600). Just for the sake of simplicity, I focused on the big puzzle pieces. (Hard to keep these videos from ballooning from 5-15min into 20-30min videos.) Thanks for watching and for sharing your perspective!
@@CanadianRealEstateChannel
I recently inquired while refinancing my home outside of Montreal this month and if you refinance while in negotiations to renew, the bank pays for the home evaluation or appraiser but once you sign a deal with the bank and then decide to refinance, the property owner pays for the appraiser. Also the costs of cancelling a deal with a bank to refi are high. Btw, as of last year my bank does not do 35 year mortgages, 30 years max and you cannot change the amortization from a short one to a longer one anymore.
Dont you have a penalty when you refinance a typical loan before the 5 year period is up? Or are you getting a 1year financing loan on your rental properties?
It really depends on what mortgage you get. We usually will either use an improvements plus mortgage (no penalty type of mortgage), an open mortgage, or a 6-1year mortgage depending on the exact project etc. (Some of these options you'll pay a higher interest rate, but it's only for a few months so not a big issue - and you factor that into your cost analysis on the project) thanks for watching!
Matt McKeever Thank You for sharing your knowledge and experience. I hope to get over any hurdles and pull the trigger on a deal asap
I hear ya and I understand the strategy, thank you... but what are the risks? Bank not agreeing with your valuation is the only one I can think of. Are there others?
One question. What exactly is the process of re-financing? I cannot be the only one who is lost on that part..thanks Matt
+Morad Al-Muhandes hi Morad - it really does depend on your exact situation/technique. I have been getting a lot of similar questions - I’ll try and have a video shortly on this topic.
Hi Matt, great video! Quick question, I am still confused where the $64,000 comes from. The bank just gives it to you?
What do the mortgage payments look like after refinancing will they be the same?
Would this not just result in you getting more and more debt from all the mortgage loans on the houses?
Yes, but if the property cash flows after the refi - you’re making money every month and paying down the new mortgage and can go buy another property and repeat the process
Can you do that without renting it?
You explained this really well. Thanks for the great points about your strategy!
Glad it was helpful!
Will you still cashflow even after the refinance?
This does clarify things for me. My biggest question is how can we continually refinance after about 4 mortgages. Don't the banks cut you off?
So amazing to see how you've grown your subscribers from 2.5K to now well over 61K 🙂 #Respect Wishing you all the best as another fellow Canadian youtuber 🙏🎬
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you explained how to raise money but what about how to repay that amt particularly when property's rental income is lower than your EMI
Do you pay penalties for refinancing early?
will the bank will give us loan on every property ?
Im confused at how you got 64,000? And how do you get cash back? Wouldnt that just be a loan? And does the interest rate go up with this method?
Hey Matt thanks for explaining the BRRRR method.
Thanks for watching Mario!
I live in Ontario too, I'm beginning to invest in real estate in Nova Scotia. I'm debating between buying personally or incorporated. I'm leaning towards personally because I would need a mortgage then possibly transfer to a corporation title afterwards? How would you start?
Curious as to which route you chose as I am planning on doing the same.
I am so happy see someone in another Canadian market having so much success with the BRRR strategy. I work with Sandy MacKay, the cofounder of the Breakthrough Real Estate Investing Podcast, I'd love to see you on it sometime to share all of this knowledge. So nice to have another resource focused on Canadian real estate investing!
Moguls in the Making,
Whats the exact name of the podcast?
I'm just north of Montreal and looking for Canadian realestate content to help guide me as I start this journey.
Moguls in the Making,
Whats the exact name of the podcast?
I'm just north of Montreal and looking for Canadian realestate content to help guide me as I start this journey.
Thanks! How soon can I apply for refi, 6 months or earlier as soon as the reno is done?
Are you utilizing portfolio loans to refinance these properties?
Thanks for another great video. I think last week the assumption was that you initially bought the property in an all-cash transaction and refinanced once before repeating the strategy. Here, you technically apply for a loan/mortgage twice. I always enjoy listening to CPAs and T-accounts :)
Haha - that's exactly what crossed my mind when I was doing this exercise - T-accounts hadn't used them in a while though. 😂 thanks for watching & commenting!
Omg this video is great. Thank you for breaking it down.
Curious to know if anyone uses the Brrrr method by purchasing the property with cash and then mortgage it after its rented?
For money - do you get a hard money loan first, then pay it off with a refinance from a bigger bank after 6 months?
So the loan amount will double after every refinance?
What kind of refinance is this? What are the banks using to qualify you for this loan?
What about interest rates is going to be stable if the market gets lower?
but your leverage now is higher...so you brought some equity back, but of the price of leverage. how do you pay the bigger loan?
Hi Matt, We were in a weird situation when returning to Toronto- we wanted a house in a particular area. The area was too expensive. Instead we ended up with a triplex. Luckily the house went up in value.
What the bRRRR system does not acknowledge is that prices may tumble. And you ignore the debt column. That net worth could evaporate in a situation where the overall market falls. And if rents fall with that, you would not be able to keep up with payments.
We are lucky- we bought at 1.2mil, it was worth as high as 2.1mil, and now has probably fallen back to 1.8. We put 250k into repairs (basement, asbestos, electricity, kitchens, bathrooms, etc.). If it fell to 1mil , a big dip that could happen with interest rates, we will not be able to afford the house as 1) rents would decrease and 2) renegotiating the mortgage at significantly higher rates could make payments and upkeep become unaffordable.
The odd thing is we wanted a home and this was the best deal we could find. A single condo or home was only a little less.
If we had re-fi'd at 2million we definitely would have taken some money out but the investment itself would go to hell...and we would likely walk away from it if prices fell 25%. If we had invested in another property with the refi proceeds, we definitely would be sunk.
Also...you live in Canada. You know what deficits all levels of government are running. There will be increasing political pressure to "make the rich pay". See the CBC today. We escaped major problems, but it is just a matter of time before taxes get ratcheted up on property to pay for "free stuff". www.cbc.ca/news/canada/toronto/toronto-budget-2018-property-taxes-1.4529258
Be careful out there!
And thanks for your vids.
Victor.
How do these numbers look if you use hard money financing because you can’t get a conventional loan for a fixer upper?
Great video!
One question for you. When you go to the bank to refi the property, do you take out a home owners line of credit or a Home Owners Ready Line (will have to discharge our current mortgage as we have only had it for 7 months).
Thanks!
Kristyn
What lender do you use? in Quebec you can only do Mortagage+ reno on owner occupied properties i believe
Scotiabank
Are u subtracting the fees for the refinance?
So when you go ahead and buy the next property and then refinance it, aren't you going to end up with 2 properties and 2 mortgages at that point?
How do you get banks to cut a mortgage note that’s worth the original value plus even money or greater on your renovations? Banks here see through upgrades and fix ups and basically quote mortgages based off assessed property taxes which don’t fluctuate much, especially due to upgrades.
How did you get to the $64,000? Thank you for the videos btw! All the way from Austin Texas ¡
You refi after you rehab
He got it from the bank as another loan and the tenets are paying it off in the form of rent.
I agree the $64,000 isnt explained well. It would be best if he did the math explaining this in more detail
because his mortgage is worth 200,000 now. at 80%, the bank would be loaning him 160,000. the 64k added to his mortgage already of 96k = 160,000.
@@Lucask888_ thank you
Don’t you have to put down 25% down payment for the refinancing too?
great video and cleared the BRRRR up for me - question though on the ARV - how are you forecasting it, and what calculations are banks using to revalue the property based on rental income / refurbishments? e.g. if you increase rent by $500 does that = a certain $$$k?
This might be a dumb question, but i just want to have a clear understanding. But the rental income pays for the monthly mortgage payment (after refi), allowing you to break even on that am I right?
I totally understand this method, but the money you got from cash out refinancing, does that go into an account or can you only use that whole amount for the down payment on the next property? If that’s true then I’d have to raise more money for renovations correct? Or could you use half for down payment then half for renovation?
Great video. but, if you refinance the Monthly Mortgage goes up right? So lets say I do have someone in that property and the value from RENO shoots up. Now the Monthly Mortgage shoots up by 300 and I'm renting 350 over the mortgage. ill be making less per month, however I will have more capitol on hand to purchase more properties. am I correct? so is this BRRRR method wise? when the conditions contains tight numbers in terms of profit?
Hey Matt, i am a big fan of your channel and am based in Edmonton looking to BRRRR. Im curious what rate your orginial 80% mortgage is. Once you refinance the property do you typically do that through the same institution as you got your initial mortgage? and what is the new rate you are at once it's refinanced? what is the typical seasoning period for an appraiser to come and allow you to re-fi in YOUR market.
Thanks!
When you cash out refinance and use the money as downpayment, you still need to get a new mortgage to pay for the rest of the cost of buying your new property. How does that impact the affordability for your new mortgage? I am really intrigued by the video and love to give it a try. Appreciate a response. Thanks from a fellow investor from Canada 🙂
Does the bank refinance a SFH based cap rate or comps? You didn’t mention comps at all
Great vid Matt! I should be picking up more rentals in London this winter!
Awesome! Keep us posted if you end up buying one!
Matt McKeever I have a condo rental on chapman that I have been very happy with. It's been very hands off.
My question is how to pay off the mortgage with the rental property AND have money left for me to spend
Incredible! Love the channel man, keep it up!
Thanks for the support!
please share where to find 80% cash out refi, or the number doesnt work
When you do the cash out refi, does that have to be a 30 year fixed or it can be an ARM?
does this strategy work if your cash part is a heloc with your current home?
Hey Matt, I am here in Winnipeg Canada, what is your opinion on the market here for the BRRR method? Where did you learn all this? Did you take a class? I am interested in doing this.
Did you ever do it?
Thank you for your video Matt. It's mind blowig stuff! You mentioned in the video that there should be a market where this strategy would work within 4-5 hours drive from where we live. Do you have more information on this or could you let me know where I can find information on this? I currently live in Edmonton, but am willing to move to a bigger city (Vancouver, GTA areas) eventually. Thank you in advance for your time Matt.
Would these properties be vacant that you are BRRRRing? If not how would you get tenants out to be able to BRRRR?
This was awesome thanks Matt!!
Thanks! Glad you got value from it!
🙌🙌
Can i do refinance over and over again using a same bank? What if i plan to have a 100 properties is that possible?
If a Home is paid completely off, what’s the best loan or refinance strategy to use?
I like HELOCs but it really depends on the exact details of your situation
Heloc
How do you account for closing costs? Can you break this down in more detail?
How much interests your paying for all this refinancing?
so you have loan for 160k after refi, but your mortgage payments goes way up!
Lin Xu yea your mortgage goes up and your tenants pay it in the form of rent, and if you’ve done it correctly you still have a little bit of cash flow left from their rent after you pay your mortgage and expenses each month
Hi Matt! I just wanted to say I love your videos! I just had a question with regards to the refi process.
What type of mortgage do you recommend using for the BRRRR strategy?
I was thinking a “mortgage plus improvements” mortgage, but when I talked with my broker, he indicated no matter what type of mortgage you get, you’re going to pay penalties once you refi the property to take out the equity to buy another property because you’re essentially breaking the term whether it be variable or fixed?Is there ways to avoid paying the penalties to maximizing the equity profits? And what types of mortgages do you use and what terms on BRRR properties?
Thanks so much for your videos, they are so incredibly inspiring!
Hi Mitchell! I use the improvements plus mortgage (sometimes) and incur no costs/breaking fees. Alternatively your bank can register the mortgage at a higher amount so that in the future if you wish to refi you will not incur any legal fees etc. There are a lot of nuances to all this - but in general there should be strategies to avoid any breaking fees etc or to get the bank to waive them. If you ask the question multiple times and keep getting the same answer, either change the people your asking the question to, or change the way you're framing the question. Hope that helps and thanks for watching!
Hey Matt great video! I do have a question, how do you factor in if you would do this or not? Do you look at what the new mortgage will be at the higher level and see if it will still cash flow? If it will not cash flow positive will you still do the refi to get the cash to move on to the new property. Also with the Fed starting to raise interest rates do you think the mortgage rates will go up also and effect the BRRRR strategy? Thanks once again for the super informative videos!
Hi Chris - yes ensuring it cash flows is important to me. I aim to have it between .7-1% rule after refi, which means it usually is Cashflow neutral or positive
How did you get the $64k number for the refi? W the LTV at (80/20), wouldnt the number be closer to $82k?
The $64,000 figure confused me, but let me see if I understand this part right.
The new ARV is $200k, and the 80% cash out for that would be $160k. However, you still have to repay the original mortgage (before rehab) that was $96k (80% of the original $120k buy price), so $160k - $94k = $64,000. Is that correct? Is that where that figure comes from?
I’m wondering if you take out a hard loan for the initial purchase what I have to get another loan for the refinancing aspect and then take the additional income from the new loan and pay off the old one?
Hi Matt,
Can you explain, where the closing costs expenses are, how much the before and after rental costs would need to be and if you need to wait till end of 1st term to re-fi or pay the costs of the appraisal yourself?
Thanks.
Hi Matt, great video. However, what if you bought a condo that doesn’t need any “rehabbing”, thereby eliminating one “R” from the BRRR, how are you able to yield an increase on your project? In other words (using your numbers) you wouldn’t get back $64,000...wouldn’t you only be able to get back the $54,000 that you started with? So would or could the BRRR strategy still work? Thanks.
So you have to have at least 54,000 to start this process?
I think it’s important to note that BRRRR investing should be calculated conservatively as if the refinance was only going to be 70-75%LTV. Those are more common and should be used to initially find your purchase price.
Depending on how tight your liquidity is (if one or even a couple refinances going wrong over extends you) then playing things safer is wise; like a lot of things it really depends on the situation and how you approach it - I perhaps don't make clear in my videos that often when I'm discussing my ARV it's a relatively conservative number - (Only once have I not got my expected or higher appraisal) - thanks for watching and commenting! I really appreciate it.
How do you meet 43% DTI ratio when this repeating this process , especially when owning primary house mortgage. As far as I know, when calculating DTI , the rental income will only be added into gross income after 2 years.... so does that mean repeating this process every 2 years?
I've been watching your videos for the past days and this seems a nice way to make money but I still have a question. Now, I'm not from the US, I live in Eastern Europe and I do not know if this process you describe can be applied here too. My question is what happens with the interest from the first loan. Usually banks will give you, for example, $160k and you are responsible for paying way more than that (let's say $330k), within the next 30 years. So I do understand that by getting a second mortgage you actually will have that $160k to pay the first loan, but that's just the principal part. You will still have to pay the interest and somehow that was not the deal with the bank since you are accountable for paying way more than $160k, over a period of 30 years.
Did you ever get any clarification on this?
The tenants pay the mortgage anyway and the interest can be written off.
Great video to clear things up with simple to follow numbers...however after you refi you will not get all 64k back in cash from the bank... please explain why you think the bank will allow you to take all your equity "cash" out
Hi Tod - as I state in the video - the bank will allow you an 80% loan to value, allowing you to access 80% of the total equity. So if you had a 96K mortgage and bank determined the property was worth 200K they would allow you to access the 64K (ie 160K total). There may be small fees that reduce the total, but for simplicity sake, you do get access to the 64K in this example. This is an investing strategy I, as well as many other investors I know, use on a regular basis - and accessing 80% of the equity is a very common occurrence. Hope that helps
Bro I didn't understand anything when I watched for the first time. It was like hard math... But watched it again and again. And now I can explain it as well. Thanks man
Glad to hear you got value!
So you are talking about bank financing, right? and Do you have a video doing the same process with private investing. I'm trying to get my first rental property. Good info thanks
The same principals hold true with private investing/mortgages (you just need to ensure the terms of the private mortgage apply)