Refinancing properties under 100k

6 Replies

Hi BP!

I am looking into a deal for which the ARV is less than $100k, I am estimating $55k to $65k based on MLS comps. I am looking to implement the BRRR strategy so buy it cash and refinance once its rehabbed and rented. Has anyone refinanced a property that appraised under 100k? How difficult was it to get a loan of this amount and what lenders should I approach to confirm they would lend on this property?

Thanks!

Originally posted by @Maricruz Romero :

Hi BP!

I am looking into a deal for which the ARV is less than $100k, I am estimating $55k to $65k based on MLS comps. I am looking to implement the BRRR strategy so buy it cash and refinance once its rehabbed and rented. Has anyone refinanced a property that appraised under 100k? How difficult was it to get a loan of this amount and what lenders should I approach to confirm they would lend on this property?

Thanks!

It's great that you're looking into this in advance and if the loan amount is above 50K you should be good. If you're under 50K but over 30K some banks will be able to help you and if under 30K you'll need a local bank, private lender or HML.


@Maricruz Romero Private lender will usually want 75k property value (60K as part of portfolio loan) and a minimum loan amount of 50k for the 30 year rental loan and will lend to 70% of value (can get up to 80% with exception). for a fix n flip can go as low as 25k loan amount.

@Maricruz Romero

Hi Maricruz,

First off, I think you are very wise to look at take-out financing before you embark on your project.

My experience has been that there are very few lenders that offer this type of product. The reason for this is that loan amounts at that level (sub 75k, or even sub 100k) can cause a fair bit of difficulty for the lender (relative to what the property is worth), if you are unable to repay your loan.

Regarding which types of lenders would be able to handle this, it's not a bad idea to ask local investors who have done lower-value projects who they have used to refinance. Also, calling some local banks is probably a good idea, as they will be able to offer a lower cost of capital than alternative lenders.

Best of luck,

Michael


@Maricruz Romero , hi and welcome!

Yes, I do this frequently.  The kind of lender you want is a local bank who can appraise the deal almost via a drive by.  Get to know a branch VP or some one like that who has a "floor limit" on what they can approve without going to a committee or board to get approval.  I've got several places that we're refinanced recently in the $30K - $50K range, and these kind are easy to do.  Appraisal: $300-$400, loan fee $150, fees $100ish.  All done for around $500-$600.  They portfolio the loan in house and make their interest off the interest rate spread.  It helps if they know you have several places like this or intend to do volume with them.

They key with smaller properties is to keep your costs low!  Under 2% is ideal.

@Maricruz Romero this can be a challenge of course, but I'm glad to get my team to look at any deals you have.  Even if they are not a fit for us directly, I can gladly point you in the direction of another group that may take on a smaller loan.  I like @Erik W. 's comment on local banks as the starting point if you have a depositor relationship.