Quick Answer
The BRRRR strategy (Buy, Rehab, Rent, Refinance, Repeat) requires careful title consideration at both the acquisition stage and the refinance stage. A title problem discovered at refinance can interrupt the cycle, preventing the investor from pulling equity out for the next property.
The BRRRR strategy is a powerful wealth-building approach, but it depends on the ability to refinance after rehab and rent stabilization. Title issues can interfere with that refinance, breaking the cycle.
At Acquisition, Review
- Does the seller have clear ownership? If not, resolve ownership questions before closing.
- Are there liens that will need to be paid off? Make sure the payoff amounts are confirmed and the liens will be properly released.
- Are there easements or restrictions that affect the property? Some restrictions can affect the property's value to a future lender.
- Is the legal description accurate? An incorrect legal description can cause problems at both acquisition and refinance. See what the legal description tells you.
At Refinance, Expect Review
When you refinance, the new lender will order its own title work. The title company will examine the chain of title from the point of acquisition forward. Any issues that existed at acquisition but were not resolved may reappear as requirements for the refinance.
For example, if an old mortgage was listed as an exception on the acquisition commitment but was never resolved, the refinance lender may require it to be addressed. A problem at refinance can interrupt the BRRRR cycle, preventing the investor from pulling equity out for the next property.
A Problem at Refinance Can Interrupt the Cycle
The BRRRR model relies on the refinance to pull equity out for the next deal. If the refinance is delayed or prevented by a title issue, the investor may be unable to recycle the capital. Understanding the title requirements for both acquisition and refinance is essential for the strategy to work.