In this episode of Get Real Wealthy Season 2, Quentin discusses the refinancing aspect of the buy renovate, refinance and rent, or the BRRR strategy.
Quentin says that when it comes to the BRRR strategy, this is when the investor gets paid. So, it is the most important step of the process. If you bought the property well, and identify what the after repair value of the property, whether it is with the help of an app, or a realtor, it should be higher than what it was when you started the project. It is really important that you take some time and prepare for the appraisal. Talking about the financing types, he says that you should be in a variable rate product, whenever you're doing this type of strategy. You want to make sure that you have the ability to get out with three months interest penalty, or you're in perhaps a private mortgage, that allows you to get out of the property current mortgage into an A lender or better product.
He adds that as opposed to the US, there is no seasoning period in Canada. He says that there are ways to prepare for the appraisal of a property. Knowing the comparables and preparing appraisal package for your appraiser is a key tool to help you get a higher than appraised value. During the appraisal, you want to make sure that you are walking through the property with the appraiser. You do not want to just find a time let them go in by themselves. You need to let them know about the new wiring, the upgraded plumbing, any bills or large expenses, share that you have spent the money and made upgrades to this property. You want to bring up the benefits of the property, as well as compare it to the other units or properties in the area.
Talk about some of the other pieces that make this property unique and better? Put yourself on a different pedestal versus the comparable properties. You want to make sure that you're doing that as best as you can. In the event of receiving a low appraisal, there are a few options for you. One, you can talk to your mortgage broker, your mobile mortgage specialist bank, and you can ask them, Can I get another appraisal? Sometimes you can. Another option would be to question the comparables that were used. In the appraisal, perhaps they are comparing your legal duplex to a similar single family home which is not the same, and especially if an appraiser doesn't know or understand the difference.
The third thing that you could do is you could take a short term mortgage, maybe a one year term, perhaps a variable rate mortgage, and get the property appraised again in a few months. A fourth option would be another financial company to come in and put the mortgage on the property and try for a different appraisal.
- The Ultimate Wealth Strategy: Your Complete Guide to Buying, Fixing, Refinancing, and Renting Real Estate
- Getting Higher Appraisals: The Basics