BRRRR loan structuring

2 Replies

Hi there, I'm in the process of acquiring another single-family home for a BRRRR. I have for the past used conventional loans that came with a six month seasoning period before eligible for refinance, which is somewhat time limiting. Then when refinancing it required substantial closing costs which my banker says it's a new origination/appraisal ..etc. Commercial lending seem reasonable with built in loan for rehab too but how do you negotiate a fixed 30 yr rate with a commercial lender during refinancing? Most commercial lender I approach says after 5 yrs the rate is variable. I'd like to see what other BP members' experiences are in structuring their loans as to reduce cost for BRRRR buy and hold. Thanks!

@Mike Chang

With your scenario, and an adjustable rate, you will probably need to refinance again down the road when it becomes adjustable, and you risk a higher rate, than locking in a fixed rate with today’s low rates. Plus you are going to have the costs of a refinance still, possibly several times if you plan to hold the property, if you want to lock in fixed rates. 

Not really a cost savings, but a way to cash out faster, or more with conventional and using delayed financing. 

If you include on your closing statements (which vary state to state - HUD-1/ALTA statement ) the renovation costs - and have them charged at closing...... This renovation cost now becomes an initial closing cost and can be included with the max that you are able to pull out prior to 6 months. This is underwriters discretion as well, so speak with your lender first to see if they can do this.

@Mike Chang

Many portfolio lenders have 30 year fixed money, but it's  more expensive than conventional.  Be prepared to pay a higher cost for the money to avoid seasoning on title and income verification.

Stephanie