Refi Lender Vetting (BRRRR)

[David Leodore]

Hi All, I’ve been using the BRRRR strategy lately and would say that my most painful piece of the process is lender vetting. I’ve primarily been using one specific company here are the pros and cons: Pro: The refi mortgage does not show up on my credit report allowing for unlimited repeat scenarios They only look at the debt:income of the property I have a great relationship with their appraiser and can obtain the ARV before purchasing! The process is somewhat easy to navigate Con: The LTV is usually 65%-70% of the ARV The origination and misc fees are hefty The interest rate is HORRIFIC (high 7% to mid 8%) The problem that I’ve faced is that when going through other lenders with better terms, their underwriting process is more difficult and more importantly in one scenario, their appraiser came back with an appraisal that was $30k lower than “company A.” I could really use some advice on how you have all found cash-out refi lenders that help your business grow time and time again. Thank you!

[Jared Rine]

@David Leodore...what type of interest rates are you trying to obtain? Are the loans you're obtaining now on an interest-only basis? I'm interested in your loan structure with your current lender that does these deals for you. Because it sounds like you're trying to get too much in one loan, while expecting potential unrealistic outcomes (from my experience). I'm assuming this is some type of private/portfolio money, but you're getting ARV money at what many investors would consider lower interest (subjective).

Most lenders who will lend you the purchase/rehab money don't lend the long term/cash-out money. What you have on the table for the structure sounds pretty good, as most of my clients who do this strategy, usually do a '2-step' process with different lenders - take down property/rehab w/ fix/flip type loan (higher interest I/O basis, lending on some type of ARV) and then they refinance with a longer term portfolio/alternative money (some type of ARM, lower rates). I haven't seen a lender who has a catch all for this type of deal - low interest, low fees, great long term, lending on ARV, etc. There has to be give somewhere.

@JR M...that could be a lot of dough tied up over time and I agree with you; that money that you're keeping with them is also allowing them to make lots more money on the outside.  I'd be interested in seeing what you've got going on.  Might be worth taking a look at different lending options.