Hard Money Terms for BRRRR Strategy

9 Replies

I recently completed my first flip with a hard money lender. I put in about $25k and scheduled to close in a few weeks with profit of about $30k. Essentially I'll have a little over $50k for my next project in which I've been thinking a lot about using the BRRRR strategy.

I'll set up a scenario: I find a foreclosure at action for $140k with an ARV of $245k after $30k in repairs. My HML would likely want around $25k of my own money into the deal.

For the refinancing part: From what I'm hearing, most lenders cap at 70% LTV which would give me roughly $170k for a refinance after the 6 month seasoning period. Ideally, I would like to have enough money ($25k or more) left over to jump into another deal once this project is complete.

What kind of initial loan terms would be generally acceptable from a HML for the purposes of a BRRRR? My current HML for the flip was a 6 month loan. I would most likely need longer terms for BRRRR and just want to have some real life numbers from some of you who have done these deals to know what makes the most sense when I walk up to the negotiating table.

Also, I live in Delaware if that helps.

Thank you for any help you can provide!

-Brandon

Originally posted by @Jason D. :
@Brandon Caldwell I'm working with a HML now that does 85% ltc and 100% rehab, 2.5 points, 11% interest. My last one one was 80% Ltv, 3 points, 10.5% interest

 Hi Jason,

Is the LTC loan going to be as good as the LTV loan was? What numbers were your percentages based on ... ie what was the ARV on the ltv and what was your cost on the ltc (purchase only or purchase + repairs?)

@Erin Elam the LTV loan was for $80k on a $55k purchase and $40k reno. I had to put up a $20k down payment at closing. The LTC loan I'm closing on next week is a $90k purchase and $15k reno, and I'm putting down $13,500.

@Brandon Caldwell , will your property be able to generate any positive cash-flow after you refinance it? That is a key part of the BRRR strategy.

What kind of rent do you expect when its completed?

Hi @Brandon Caldwell ,

You're not going to find a "standard" set of terms for HML. They're all over the place really. A good one will work with you and be flexible to give you the best terms possible for your deal and experience level.

For example, at Walnut Street Finance we're up to 90% of Purchase and Repair Cost, up to 75% of the ARV, and we'll finance 100% of the renovation costs. Good luck and hope that helps.