Questions on Financing First Flip or Potential BRRRR

Moderator

Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes

Hey everyone,

I posted a few weeks back on any suggestions for an aspiring flipper/long term investor. You guys kept me motivated so I've been on the search for deals in my area. I ran across a for sale by owner sign and got to researching that night. The next day I went over and tried calling the number but it was disconnected so I knocked on the door multiple times with no answer. I drove away but then I figured I'd loop back around and try the back door. I was able to get a hold of the owner and get a tour of the home. As I expected from the area/researching the old listings, it needs work but nothing major. I think this could be the perfect first flip or a home that I could utilize the BRRRR method. We spoke at the beginning about what he wanted for purchase price but by the end I was able to talk him down to what I think is a workable number. Needless to say, I may have found my first deal.

I was hoping to get some insight again from the community here on where/what I should do for financing. I am torn on whether or not to utilize the BRRRR method or flip this one. Is this something that a hard money or private loan would be best for as I'm undecided? Then my understanding would be that I would be able to go to a local bank and ask for a cash out refinance after it's renovated/rented if I decide to go this route? Any advice for my situation or general advice for someone just getting started would be greatly appreciated. Thank you in advance!

So for a BRRR, things have change over the years - today you can get a RTL (fix and flip) loan that for first timers will have a low LTV - expect to have to kick in 25% down payment (mightn be able to get less but do not expect 0 down). Rates will be high etc - once you complete the rehab you can refinance into a DSCR loan. Some lenders can give you breaks on points etc. if you do both loans through them (something we do).

It will boil down to your credit score (must be above 660) and have some money for down payment. There are lenders out there who work outside of these boxes but those loans get very very expensive.

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Nick Gauss

OP

Member since 2025 · 25 posts · 16 votes

1y

Thats good to know. Thanks for replying so quickly. I have been looking at some of the hard money loans available and one I'm looking at now says they will cover the rehab costs. Will a bank normally provide this with this type of loan?

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Patrick Roberts
Lender · Charleston, SC · Member since 2019 · 1k+ posts · 1k+ votes
1y
Quote from @Nick Gauss:

Thats good to know. Thanks for replying so quickly. I have been looking at some of the hard money loans available and one I'm looking at now says they will cover the rehab costs. Will a bank normally provide this with this type of loan?

No, unless you have great credit, really good employment history and income, a good relationship with a local bank, and loads of time for this to drag on, then they are unlikely to touch this. Hard money lenders specialize in this kind of thing. They will fund the purchase of the property and the rehab, but you will have to contribute part of the total cash needed. These loans move quickly (usually fund in way less than month, as in 7-10 days), but they also typically dont allow for terms longer than about 9-12 months.
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Mike Klarman

Specialist · NJ · Member since 2022 · 1k+ posts · 663 votes

1y

If your credit is 700+ and the project cost is sub 70%, you can probably find 85%.

But before I did anything, I'd have whoever is going to do the work do a thorough walkthrough with you and get an itemized budget together.

Then apply this formula:

P = Purchase Price

R = Rehab cost

ARV = After repair value

P + R/ARV < ?

I put a question mark because people put an array of numbers there. Some 75%, some 70%, if you can get under 70% that's best. If you get close to 60% then it's a great deal. Under 60% it's a home run and under 50% is a pure steal. At 75% it can be hit or miss, once you go over that you are on a slippery slope and if your construction runs longer and costs more (which happens A LOT), and then you miss your appraised ARV by 10% - 15% (Which happens A LOT), then you will lose money.

3 Reply

Nick Gauss
OP
Member since 2025 · 25 posts · 16 votes
1y
Quote from @Mike Klarman:

If your credit is 700+ and the project cost is sub 70%, you can probably find 85%.
But before I did anything, I'd have whoever is going to do the work do a thorough walkthrough with you and get an itemized budget together.
Then apply this formula:
P = Purchase Price
R = Rehab cost
ARV = After repair value
P + R/ARV < ?
I put a question mark because people put an array of numbers there. Some 75%, some 70%, if you can get under 70% that's best. If you get close to 60% then it's a great deal. Under 60% it's a home run and under 50% is a pure steal. At 75% it can be hit or miss, once you go over that you are on a slippery slope and if your construction runs longer and costs more (which happens A LOT), and then you miss your appraised ARV by 10% - 15% (Which happens A LOT), then you will lose money.

I do like the idea of having the person doing the work do a walk through with me first. I actually filmed the home while I was there so was able to take that to my guy and get closer estimates on the costs. After reviewing numbers closer, including lender costs etc. this deal got a lot tighter than expected. I can make money on it but if I don't hit my higher end of the ARV I will have made very little. I plan to go back to the homeowner and see if we can negotiate lower.
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AJ ExnerPro Member

Lender · Springfield, MO · Member since 2023 · 663 posts · 320 votes

1y

Quote from @Nick Gauss:

Hey everyone,

I posted a few weeks back on any suggestions for an aspiring flipper/long term investor. You guys kept me motivated so I've been on the search for deals in my area. I ran across a for sale by owner sign and got to researching that night. The next day I went over and tried calling the number but it was disconnected so I knocked on the door multiple times with no answer. I drove away but then I figured I'd loop back around and try the back door. I was able to get a hold of the owner and get a tour of the home. As I expected from the area/researching the old listings, it needs work but nothing major. I think this could be the perfect first flip or a home that I could utilize the BRRRR method. We spoke at the beginning about what he wanted for purchase price but by the end I was able to talk him down to what I think is a workable number. Needless to say, I may have found my first deal.

I was hoping to get some insight again from the community here on where/what I should do for financing. I am torn on whether or not to utilize the BRRRR method or flip this one. Is this something that a hard money or private loan would be best for as I'm undecided? Then my understanding would be that I would be able to go to a local bank and ask for a cash out refinance after it's renovated/rented if I decide to go this route? Any advice for my situation or general advice for someone just getting started would be greatly appreciated. Thank you in advance!

Hey Nick,

Congrats on taking that first step! Is the property there in Madison, or did you track one down elsewhere?

As for your question on Hard Money Loans, yes they will generally cover a portion of the purchase price (say 80-90%) and most will do 100% financing of the rehab based on a reimbursement/inspection schedule

That is usually the toughest part as you get started, most will want to see you do the rehab first, and then do a 'draw' in order to get the funds back. This usually does not include ordering the supplies, so they like to see it completed before the full funds are reimbursed.

Most HMLs for first timers will tweak initial leverage based on FICO and the area you are investing in. If its a good area, a good deal, and your FICO is good, then that will put you in the best position for most groups.

I hope that makes sense, happy to connect and discuss further.

Good luck!

[email protected]417-427-2612

1 Reply

Nick Gauss
OP
Member since 2025 · 25 posts · 16 votes
1y
Quote from @AJ Exner:

Quote from @Nick Gauss:

Hey everyone,
I posted a few weeks back on any suggestions for an aspiring flipper/long term investor. You guys kept me motivated so I've been on the search for deals in my area. I ran across a for sale by owner sign and got to researching that night. The next day I went over and tried calling the number but it was disconnected so I knocked on the door multiple times with no answer. I drove away but then I figured I'd loop back around and try the back door. I was able to get a hold of the owner and get a tour of the home. As I expected from the area/researching the old listings, it needs work but nothing major. I think this could be the perfect first flip or a home that I could utilize the BRRRR method. We spoke at the beginning about what he wanted for purchase price but by the end I was able to talk him down to what I think is a workable number. Needless to say, I may have found my first deal.
I was hoping to get some insight again from the community here on where/what I should do for financing. I am torn on whether or not to utilize the BRRRR method or flip this one. Is this something that a hard money or private loan would be best for as I'm undecided? Then my understanding would be that I would be able to go to a local bank and ask for a cash out refinance after it's renovated/rented if I decide to go this route? Any advice for my situation or general advice for someone just getting started would be greatly appreciated. Thank you in advance!

Hey Nick,
Congrats on taking that first step! Is the property there in Madison, or did you track one down elsewhere?
As for your question on Hard Money Loans, yes they will generally cover a portion of the purchase price (say 80-90%) and most will do 100% financing of the rehab based on a reimbursement/inspection schedule
That is usually the toughest part as you get started, most will want to see you do the rehab first, and then do a 'draw' in order to get the funds back. This usually does not include ordering the supplies, so they like to see it completed before the full funds are reimbursed.
Most HMLs for first timers will tweak initial leverage based on FICO and the area you are investing in. If its a good area, a good deal, and your FICO is good, then that will put you in the best position for most groups.
I hope that makes sense, happy to connect and discuss further.
Good luck!

Thank you! It felt good to walk into my first potential flip or rental. I was able to track it down 40 minutes north of Madison close to home. After reviewing numbers further, and speaking with some more people, I may have to come in at an even lower offer to make this a safe bet on this as a first deal. Regardless of if this one works I will continue to assess deals daily until we are able to land on that first one.
I would love to talk more on the funding and any helpful advice you may have. I will reach out via inbox.
Thank you.
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Margie Cindy Santos

Lender · Member since 2025 · 19 posts · 6 votes

1y

Hi Nick, I like your story. You're moving like a seasoned deal hunter already! Here's how I'd think about moving forward:

1. Run the numbers - ARV (get comps), repair costs (walk the place again with a GC if you can)

2. Due Diligence - are taxes current?, free from liens?, age of roof, HVAC, electrical, etc.

Depending on what will be your final decision whether BRRRR or flip, Hard money lenders can help you out on this one. Happy to assist!

1 Reply

Nick Gauss
OP
Member since 2025 · 25 posts · 16 votes
1y
Quote from @Margie Cindy Santos:

Hi Nick, I like your story. You're moving like a seasoned deal hunter already! Here's how I'd think about moving forward:

1. Run the numbers - ARV (get comps), repair costs (walk the place again with a GC if you can)

2. Due Diligence - are taxes current?, free from liens?, age of roof, HVAC, electrical, etc.

Depending on what will be your final decision whether BRRRR or flip, Hard money lenders can help you out on this one. Happy to assist!
Thank you, it feels good to make those first steps and getting some real practice at running these numbers. I work in HVAC service/construction so that was helpful when walking through and going back on video that I took of the place. After reviewing all possible numbers and different circumstances I will have to go in for a lower offer on the home if I want to make this the first flip or rental. I would love to speak more with you on the lending side of things. Reach out via inbox whenever you get the chance!
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Questions on Financing First Flip or Potential BRRRR

Questions on Financing First Flip or Potential BRRRR

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