Chattanooga BRRRRR Lender?

Question

Hello Everyone! I just bought my first two duplexes in Chattanooga and I'm addicted to the cash flow right now. Unfortunately I made the mistake of tying up a lot of my money but I am in the process of saving up to be able to fund the next deal.

The next deal I want to do is going to be a BRRRR and I've been calling lenders who will do this. But I'm having trouble finding someone who will do it in Chattanooga and on the level that David Greene and Alex Felice talk about in Episode #301 of the BPP.

Are there any investors in the Chattanooga area that have a lender they can recommend??

Brian Levredge · Answer

For those still looking to employ this strategy, make sure you actually find the lender to do the take out financing prior to getting into the deal.  Appetite for residential with a lot of commercial lenders has diminished, especially with out of state borrowers.  They view it as riskier now due to the market cycle.  I'm here in Chattanooga and have a relationship with a number of banks.  Most won't touch residential or if they do they'll do it on a 15y instead of 20y.  This is complicated by the fact most will want to know your cost basis in the property and won't want to cash you out completely, again because they view it as riskier.  I'm sure there are lenders out there who still do this, it's just getting harder to do.

Teague Anderson · Answer

I don't remember the ins and outs of episode 301, but you could use the delayed financing exemption with a conventional Fannie/Freddie loan.  I'm actually in the middle of a refi like that in Chattanooga right now.  PM me and I can give you my lender there.

She hadn't ever heard of the delayed financing exemption before I told her, but she called her underwriter and then called me back and said "yup, we can do those."  It might have been in episode 301 where the guest talked about putting fix up costs on the HUD as a "prepaid fee".  That's what I want to try on my next purchase.  The only catch is that you need to get an accurate scope of work with a contractor you trust before you purchase the house.  Then you pay the fix up costs at closing, and it is either held in escrow, or paid directly to the contractor immediately (hence the trust part).  I have no idea what happens if the rehab comes in under budget and you have extra money to the contractor or in escrow.  I don't think you could get it back, because that smells a bit like loan fraud to me.

The last thing to keep in mind is that the bottom line of HUD is the maximum you can take out, but that's assuming that that amount is 75% (cash-out LTV) of the appraised value after fixing it up.

Writing this brings up a couple questions I'm going to make a note to myself to look up:

1)  What happens if you have extra money in escrow?

2) Do the fix up costs as "prepaid fees" need to be earmarked for a specific party, or could it be a general fund you can direct later?

Chad Lamb · Answer

@Brian Levredge great info, thank you!

Justin Kane · Answer

if you BRRR correctly you will be "tying up" very little to no money.. ie buy a 100k property for 50k put 10k into it with closing 10k 70k total in after refi of 70% = 70k loan = 0money in infinite return.

however you would rather be passive you could learn how to invest with the right syndication groups could offer better cashflow for you but that would "tye up" your money but then again what exactly are you wanting cuz if its cashflow and to scale bigger then that could be the best way

Dan Beaulieu · Answer

@Vic Liang Nobody likes tying up Capital! I'm a local investor there... Please reach out to me any time. I have some amazing options for you and I'd love to connect.

Ryan Blake · Answer

@Vic Liang If you are looking for the front end, I would suggest @Daniel Beaulieu. He can provide local advice and knowledge and get you some pretty good rates on short-term financing. Also, he has a lot of connections that he can put you in contact with for refinancing into long-term notes to complete the BRRRR.

Good luck!

Chattanooga BRRRRR Lender?

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