Financing challenges on first BRRRR deal in a low-price market
Investor · LA · Member since 2025 · 16 posts · 9 votes
Financing challenges on first BRRRR deal in a low-price market
13 Replies
- Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes9mo
@Lacreasha Green, my market in a former coal region of Pennsylvania was like that when I started. Prices have since come up.
However, when I started, the ARV would not qualify for many loan options because the loan amounts were too small. One of the last "cheaper" BRRRRs I did was in 2020 when I bought a small single family for $20k, invested $10k and my own labor in a rehab. In 5 months I was done and the house appraised for something like $60-65k. I believe when I did my cash-out refi it was for $45k. It's currently a $1100/month rental. So, it was a nice BRRRR.
To get a refi loan on small amounts like that my best option was local/regional community banks (credit unions would likely be good too). Those smaller local entities will often finance things other lenders will not. The loan process is cheaper than a DSCR loan but you are usually looking at a shorter term 15 or maybe 20 years and a variable rate not a fixed rate of interest.
Those terms are fine on small loans on deals like this. They cash-flow so well that the shorter term doesn't keep them from cash-flowing at all and since I pull MORE money out on the refi than I spent I was working with more and more cash with every loan. So, I didn't need the cash-flow at that moment anyways.
Later on, I decided to pivot these loans to focus on cash-flow. I considered refinancing into longer term fixed rate loans but the process was expensive for things like DSCR loans. So, I talked to the lender and AT NO COST, they re-amortized the loans stretching out the payments and doing a rate reset to lower the rates as they had come back down a little. So, I accomplished my main goal for no cost.
For purchases and rehabs, I use cash! No loans means no exigency with time like you have with expensive hard money. So, when a tradesman isn't showing up it isn't costing me expensive interest. I can use the time flexibility to my advantage in many ways by hiring someone at a lower skill level and managing them more closely or even doing more work myself if I choose.
- Investor · LA · Member since 2025 · 16 posts · 9 votes9mo
Thank you for sharing this — that’s a great example and very encouraging. It’s helpful to hear firsthand experience from someone who started in a similar low-price market and made the numbers work over time.
The point about local community banks and credit unions makes a lot of sense, especially given the flexibility on smaller loan balances and the ability to adjust terms later. I’ve been focused heavily on national lenders and hard money options, but your experience highlights why local relationships are likely a better long-term fit in markets like this.
When you initially approached local banks/credit unions for those early refis, did you already have the property stabilized with a tenant in place, or were they willing to lend based on projected rents and appraised value post-rehab? I’m trying to structure my first few deals in a way that sets me up for scalability without unnecessary friction.
- Investor · LA · Member since 2025 · 16 posts · 9 votes9mo
Quote from @Lacreasha Green:
@Kevin Sobilo Thank you for sharing this — that’s a great example and very encouraging. It’s helpful to hear firsthand experience from someone who started in a similar low-price market and made the numbers work over time.
The point about local community banks and credit unions makes a lot of sense, especially given the flexibility on smaller loan balances and the ability to adjust terms later. I’ve been focused heavily on national lenders and hard money options, but your experience highlights why local relationships are likely a better long-term fit in markets like this.
When you initially approached local banks/credit unions for those early refis, did you already have the property stabilized with a tenant in place, or were they willing to lend based on projected rents and appraised value post-rehab? I’m trying to structure my first few deals in a way that sets me up for scalability without unnecessary friction.
- Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes9mo
Quote from @Lacreasha Green:
Thank you for sharing this — that’s a great example and very encouraging. It’s helpful to hear firsthand experience from someone who started in a similar low-price market and made the numbers work over time.
The point about local community banks and credit unions makes a lot of sense, especially given the flexibility on smaller loan balances and the ability to adjust terms later. I’ve been focused heavily on national lenders and hard money options, but your experience highlights why local relationships are likely a better long-term fit in markets like this.
When you initially approached local banks/credit unions for those early refis, did you already have the property stabilized with a tenant in place, or were they willing to lend based on projected rents and appraised value post-rehab? I’m trying to structure my first few deals in a way that sets me up for scalability without unnecessary friction.
Early on, they did want me to own the property for 1 year. I rehab slowly so that really wasn't much of an issue. The first couple rehabs, I initiated the refi, when I had a tenant signed to a lease but they had not yet moved in. So, the appraiser could see the unit fresh and still vacant but I had a tenant signed to a lease.
I think if there was no lease, the appraiser would have estimated market rent. However, these were not DSCR loans. So, they weren't basing their decision on the ability of the property to generate an income. They wanted to know ME. So, I had to provide a personal financial statement etc. The loan was made based on appraised value using comparable sales and trusting ME I believe. So, the fact that I am so solid and reliable and that shows on paper makes them want to do business with me.
- Lender · Charleston, SC · Member since 2019 · 1k+ posts · 1k+ votes9mo
It all really depends on the circumstances. What are the figures of your deal? I'm guessing youre buying a distressed property for around $30k or $40k and it needs another $50k or so in rehab work? We need more info to provide any kind of reliable or accurate input.
One of my clients in SC does something similar to this in a small SC city. She buys properties for $25k-$50k, rehabs them, and then either sells or converts them to LTR's. She has bought a few with seller financing and then used personal unsecured lending, like personal loans and credit cards, for the rehabs. It's worked for her, but this is also a very risky strategy. The biggest risk is that heavy consumer finance borrowing can pull down your credit scores, making RE loans hard to get when youre done with the project.
- Investor · LA · Member since 2025 · 16 posts · 9 votes9mo
@Patrick Roberts I Appreciate the perspective — that’s helpful context.
My current deal is a single-family property with a purchase price around $20k per property, estimated rehab between $30k–$50k, and ARV in the $120k–$150k range. The plan is to rehab, rent, then refinance (BRRRR).I’ve considered strategies like seller financing or short-term unsecured capital for rehab, but I’m cautious for the reasons you mentioned — especially protecting credit and keeping refi options open. My focus right now is identifying a structure that allows me to execute the first deal cleanly while setting up long-term scalability.
Curious in your experience, when working in smaller markets, what funding structures tended to strike the best balance between speed, risk, and long-term flexibility?
Appreciate the perspective — that’s helpful context.
My current deal is a single-family property with a purchase price around $20k per property, estimated rehab between $30k–$50k, and ARV in the $120k–$150k range. The plan is to rehab, rent, then refinance (BRRRR).
I’ve considered strategies like seller financing or short-term unsecured capital for rehab, but I’m cautious for the reasons you mentioned — especially protecting credit and keeping refi options open. My focus right now is identifying a structure that allows me to execute the first deal cleanly while setting up long-term scalability.
Curious in your experience, when working in smaller markets, what funding structures tended to strike the best balance between speed, risk, and long-term flexibility?
- Investor · LA · Member since 2025 · 16 posts · 9 votes9mo
This is incredibly helpful — thank you for taking the time to explain that. The distinction you made between DSCR-based lending and relationship/portfolio lending really clicked for me.
It makes sense that on smaller balance deals, especially in lower-cost markets, the lender is underwriting the borrower just as much as (or more than) the property. I appreciate you sharing how having a signed lease, even prior to move-in, helped support the refi while still allowing the appraiser to see the unit in fresh condition.
This reinforces the importance of building strong local banking relationships and being prepared with a solid personal financial picture early on. I’m definitely taking that to heart as I structure my first few deals. Thanks again for sharing your experience.
- Real Estate Investor · Burlington, VT · Member since 2010 · 2k+ posts · 1k+ votes9mo
@Lacreasha Green For smaller deals in my area (VT), I used local banks and worked with the commercial lending department.
One deal was $50k purchase, $25k rehab, $110K ARV. 20% down and the bank provided the remaining purchase + rehab funds, and when the rehab was complete, it automatically converted to a regular commercial 20 year mortgage. No need to refinance and or second set of closing costs. Minimal points and a regular interest rate (7-9 %), not the HML rates.
Hope that helps!
- Investor · LA · Member since 2025 · 16 posts · 9 votes9mo
This is extremely helpful — thank you for sharing that example. That structure makes a lot of sense, especially eliminating the need for a separate refinance and second set of closing costs.
It’s encouraging to hear that local commercial lending departments will work with smaller deals and provide purchase + rehab financing that converts directly into long-term debt. That kind of portfolio structure seems much better suited for lower-cost markets than traditional hard money.
I’m actively starting conversations with local banks and credit unions now to explore similar options in my market. I appreciate you taking the time to share what worked for you.
- 8moStacy RaskinBusiness MemberLender · Member since 2022 · 1k+ posts · 509 votes
There are DSCR loan options that will use the new appraised value after 6 months after the remodel if looking to do a cash out refinance on an investment property. Minimum appraised value needed is $75,000 and loan amounts will go down to $50,000 depending on the LTV details. For DSCR loans, the property needs to be in ready to rent condition. If you have loan amounts above $100k, there are DSCR loan options to use the new appraised value after three months.
There are investors who either use a hard money loan or their own funds and then convert to DSCR loans to get the property into long term financing.
Happy to connect to discuss further.
Bright Skyline518 Reviews - Investor · LA · Member since 2025 · 16 posts · 9 votes8mo
Thank you for breaking that down — that’s helpful and aligns with how I’m structuring the project.
The plan would be to use short-term acquisition/rehab capital to complete the renovation, bring the property to rent-ready condition, and then transition into long-term financing via a DSCR cash-out refinance once stabilized.
Based on current comps, the after-repair value is expected to be well above the $75,000 minimum, and the renovation scope is designed specifically to support a strong appraisal and rental profile. I’m comfortable with the 6-month seasoning timeline if required, and I’m also open to discussing options if higher loan amounts or shorter seasoning periods are available, depending on structure.
I’d be happy to connect and walk through the numbers, timeline, and exit in more detail.
Best regards,
Lacreasha- 8moStacy RaskinBusiness MemberLender · Member since 2022 · 1k+ posts · 509 votes
Quote from @Lacreasha Green:
Thank you for breaking that down — that’s helpful and aligns with how I’m structuring the project.
The plan would be to use short-term acquisition/rehab capital to complete the renovation, bring the property to rent-ready condition, and then transition into long-term financing via a DSCR cash-out refinance once stabilized.
Based on current comps, the after-repair value is expected to be well above the $75,000 minimum, and the renovation scope is designed specifically to support a strong appraisal and rental profile. I’m comfortable with the 6-month seasoning timeline if required, and I’m also open to discussing options if higher loan amounts or shorter seasoning periods are available, depending on structure.
I’d be happy to connect and walk through the numbers, timeline, and exit in more detail.
Best regards,
LacreashaThank you for the details. Sounds good about connecting.
Bright Skyline518 Reviews
- Investor · LA · Member since 2025 · 16 posts · 9 votes8mo
Great — thank you.
I’m available to connect and walk through the deal. I have the full package prepared, including current photos, contractor bid, scope of work, and comps.
Let me know the best next step or if you’d prefer to schedule a quick call.
Best regards,
Lacreasha
Join the conversationCreate a free account to reply, vote on answers and follow this thread.