We're in the beginning stages of completing a contract for our first BRRRR deal and have been wondering about ways to protect ourselves in the event we're not able to refinance. We're using private money on the deal so if we're unable to refi within 3-6 months, the lenders could foreclose. What are some exit strategies that you professionals implement?
@LaQuinn Bolling , curious why you don't think you'll be able to refi? Details will help when forming potential strategies.
Howdy @LaQuinn Bolling
Are you saying you have 3-6 months left on your Private Loan? Or you need to refinance within 3-6 months of receiving the loan? What is the term length? Regardless your best option is to get pre-qualified for the refinance loan before ever purchasing any properties. This will give you good numbers to use in your analysis, provide reassurance to your Private leader of repaying the loan, and give you peace of mind.
If you have already started the process (Purchase and Rehab) start getting the refinance loan arrangements going now (it can take 30 to 60 days). If you are going to have a time crunch see if you can negotiate an extension with the Private lender (with penalties probably). If you cannot work a solution out with the Private lender try finding another Private/Hard Money Lender to get you through to the refinance. Problem with this option is it will extend the time for the refinance.
Additional details would help.
@Jaysen Medhurst Thanks for your reply here and sorry for the latency in response. I think the uncertainty comes from debt to income ratio possibly coming into question. Have a nice amount student loan debt and personal mortgage. I've been approved for a larger amount in the past, but just wanted to know if there was any expert advice from someone who wasn't able to refi and what there action steps were thereafter.
@John Leavelle thanks for your in depth reply! The situation currently is that we have a contract on a property that is being financed partially by a business partner and I, the remaining amount of the purchase and rehab is to be financed through a private money lender. The 3 to 6 month refi clock starts right after the closing, so in about a week or so hopefully. Rehab is estimated to take 30-45 days. There will be 40k equity in the property once rehab is complete and rented out. Cash flow is around $300 after expenses. We've submitted paper work to the bank but haven't received pre-approval yet, due to holidays. Should get an answer before closing.
Congratulations on getting this deal going LaQuinn!
As for the 300 cash flow is that before the refi or after? Equity of 40K sounds good, but what's the overall value?