BRRRR with private or hard money lender

8 Replies

I am getting started with real estate investing and am working on finding my first property. My main challenge is financing a deal. I am interested in the BRRRR strategy, because unfortunately I don't have much money on my own at the moment to begin investing. There are a few things I don't quite understand about the BRRRR strategy. What are the typical metrics used when organizing a deal with a lender? What percentage return do they typically look for when lending money for this type of deal? How quickly do the lenders typically want to see their agreed upon return? I would really appreciate any feedback on my specific questions, and any other advice about the BRRRR strategy.

Thank you

Hard money lenders are usually going to charge 2-4 points and 10-15% interest. They also will require a 10-20% down payment. Every private money loan will be different so I can't give you any idea on that.

Like Jason said every lender is different and some lenders even have various programs to tailor a loan to the specific borrower (various combinations of points and interest rates). Every lender will see their agreed upon return at different times because the length of the loan will vary as well as the amount of interest/points they charge.

I have used both private and hard money to fund my deals, obviously private money has more attractive terms as you are usually dealing with someone you have an established relationship with. Hard money has a few different caveats as I recently found out (the “hard” way, pun intended) I understood completely about the upfront points of 2-4% and the high rates of 10-12% but recently got involved with a HM lender that required I come up with the entire rehab budget as a “holdback” and these funds needed to be provided at closing. So please be aware of this if and when shopping for “hard money” lenders. Good luck!

Find private money (friends, family, etc). HM is too expensive to hold long.

Originally posted by @John Thedford :

Find private money (friends, family, etc). HM is too expensive to hold long.

I think they meant HML for the purchase/rehab then refinance out to a long term loan product.

Jason DiClementeVincent PaceJohn GeldertJohn ThedfordBrian Garrett thank you guys for the responses, I really appreciate it. I have a list of people I would like to approach about being a private money lender for a deal. Should I approach these people about lending money before I have a deal I would like to make an offer on? I have been analyzing deals daily, but haven't found one I would like to make an offer on yet. I have been listening to the BiggerPockets podcast as well as attending webinars and reading as much as I can. On the podcast they always recommend having the money and team lined up before finding the deal. In what ways have you found success pitching to possible lenders to gain their confidence to lend you money (I ask this as a beginner who has no deals under his belt)? I know a local investor (I have only talked to once in the three years I have lived here) who I would like to take to lunch and my plan is to talk to him about the BRRRR strategy and see if he is interested in acting as a lender on a deal. Any suggestions or thoughts about pitching a deal to an experienced real estate investor for a beginner like myself?

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