BRRRR private money question

[Jeff Oberts]

Hello, how are private money lenders typically repaid for a BRRRR method transaction?

Example: our lender is providing us with $40,000 for the purchase.  How (term, rate etc.) would they typically be repaid if we plan on refi after 6-12mo seasoning?

Thank you,

Jeff

[Frankie Woods]

Originally posted by @Erin Elam:

Originally posted by @Frankie Woods:

Originally posted by @Erin Elam:

Originally posted by @Frankie Woods:

Depends on the terms of the refinance.  Most banks doing the refinance will require a payoff of the original loan plus any additional fees / accrued interest / penalties.  The refinancing bank wants to be in first position.

Hi, can you please elaborate on this? Since the BRRRR strategy is to pull funds out in order to payoff the original lender... do you find it impossible to find a lender who will refi, in order to process that 'R' and move to the next 'R'? If no banks refi with an existing lien, how are investors using this strategy the way it is described on the webinars, podcasts, blogs, etc?

Thank you for your insight!

Sorry if this was misleading. it is fairly easy to find a lender to refi as long as you bought the property right. You can generally perform a no-cash out refi immediately upon closing. If you want to do a cash-out refi, you'll need to season the property for 6 - 12 months depending on the bank. The key aspect is buying the property at less than 75% ARV.

 Thank you Frankie! Would 'buying the property right' mean buying at the right price?

 Anytime!  And yes, most banks will want 70 - 80% Loan-to-Value for investment properties.  Therefore, if you want to get cash out of the property during the refinance, you're all in costs (e.g., purchase price, closing costs, rehab) must come in below that.