Rental Property Investor · Chicago, IL · Member since 2017 · 83 posts · 46 votes
Hello All,
I am trying to start investing with the BRRRR Strategy. I am looking into private lenders but my Lender/Agent says he's never heard of a lender giving you 100% purchase and rehab. I bought the BRRRR book and it doesn't discuss needing a 25% down payment?
Are their lenders out there that do these types of loans? Lets say I borrow $100k at 12% and 2 points. This 100k could be used for the full purchase price and the full rehab?
Do you know any that do this? If not I will start searching.
I do but they're local to Colorado, call around, I'm sure you can find one if you call enough people.
On a side note, be very careful leveraging to such an extreme degree. If you have no cash on hand and no partners with cash you're taking substantial risk. You need to have contingency plans and extra capital for when things go wrong.
All too often, new investors with no money are the ones who want to leverage to a high degree when, in actuality, it's generally something you should only do if you have a healthy amount of liquid capital.
Pre-Covid I did know one hard money lender that could go to 100% if everything was perfect (credit, experience, location). At this time 80%/100% is pretty much the max. And don't forget you will need closing costs and some reserves. Realistically, if you wanted to buy a $100K property and put $30K into it you would need between $35-$40K to get that financed (down, lender fee, closing cost, reserves to start rehab / make payments).
Rental Property Investor · Chicago, IL · Member since 2017 · 83 posts · 46 votes
6y
Is there another way to secure the 20% for the down payment and still be profitable? Maybe use a HELOC. Or something along those lines? Even when using two sources the result should be relatively the same.
I am trying to start investing with the BRRRR Strategy. I am looking into private lenders but my Lender/Agent says he's never heard of a lender giving you 100% purchase and rehab. I bought the BRRRR book and it doesn't discuss needing a 25% down payment?
Are their lenders out there that do these types of loans? Lets say I borrow $100k at 12% and 2 points. This 100k could be used for the full purchase price and the full rehab?
Please help me!
Yes, there are hard money lenders who will lend up to 100% of money needed to BRRRR as a % of the total ARV. Simply put, you have to find a very good deal to make it work.
It's also viable if you have solid rapport/trust with a private investor but that's not likely as it sounds like you're just starting. Start calling hard money lenders, there are plenty listed here on BP.
Do you know any that do this? If not I will start searching.
I do but they're local to Colorado, call around, I'm sure you can find one if you call enough people.
On a side note, be very careful leveraging to such an extreme degree. If you have no cash on hand and no partners with cash you're taking substantial risk. You need to have contingency plans and extra capital for when things go wrong.
All too often, new investors with no money are the ones who want to leverage to a high degree when, in actuality, it's generally something you should only do if you have a healthy amount of liquid capital.
Real Estate Broker · Greer, SC · Member since 2013 · 548 posts · 271 votes
6y
Gotta make a ton of offer to find a great real estate deal. In the same way, you have to make a ton of offers to potential private lenders to find one that will lend more than you are paying. If you make enough offers to find money, you will eventually get the terms you need. We have done over 300 deals where the lender provided the cash to purchase and rehab the house.
Sunnyvale, CA · Member since 2018 · 191 posts · 178 votes
6y
@Samuel Liapis maybe you should reread the first or two chapters of the book. That should answer your question. Or instead go buy Brandon’s book, no or low money down....
Developer · NY/NJ/PA · Member since 2018 · 758 posts · 935 votes
6y
For a newbie there is no lender that will give you 100% financing, and any Private investor/lender Giving 100% to new people is an idiot and will be out of business soon.
Even when you get 95% of purchase and 100% of construction, you still need more than 5% to run a deal. You have Other expenses and holding costs that makes it necessary to have more capital. 100% of construction doesn’t mean they cut you a check to go do work. It means you do the work and then they reimburse you. Aka u need that money to do the work.
With 95% and 100% financing, you still need almost 15-20% to do a deal. With 75% financing you need 30-35%.
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
6y
The BRRR method goal is to get all of your mo ey Back, when you refi in 6 mo this at 75% of the New value. It is foolish to think you don't have to put money into out of your pocket to buy and rehab it.
Real Estate Broker · Greer, SC · Member since 2013 · 548 posts · 271 votes
6y
That's not nice calling all my private lenders idiots. They have made it possible for me to do be a full time real estate investor for almost 20 years. I would never take advantage of a lender. We give them a 1st that's well below the ARV. We escrow the money to do the work. They get big 1099's every January. I have had problems from time to time and have had to use my cash to keep them whole. Overall, 95% of the deals we have nothing in them. You have to treat your lender like they are gold. The key is to always get a good deal for them to lend on. In this market, it's hard to find a deal. It's not that hard to find money. I don't use banks for houses unless I just have to. Having private debt opens up doors for future deals. Some lenders have become partners on larger deals. Lenders refer me more lenders. If you aren't spending as much time "making offers" to find private lenders as you make offers on deals, I believe you are missing an huge opportunity.
Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
6y
IMO it would be better to sit on the sidelines during this unstable time and save some cash. This way you will be ready in a year or so when things may start to unravel for some folks. (Ie deals may be had)
Rental Property Investor · Chicago, IL · Member since 2017 · 83 posts · 46 votes
6y
@Mary Mitchell I believe that is what I'm I am going to do. right now things are still unstable and people may be foreclosing due to the extended lockdown.
Lender · US · Member since 2020 · 20 posts · 18 votes
6y
As a private lender I have seen all sorts of LTV levels - even during these trying times I have seen reasonable and unreasonable LTV ratios. If a lender is not meeting your needs move on and speak to the next one. Pre-crises time we did see some lenders out their advertising 90/10 and all sorts of variations, but as of late I have seen some LTV's go as low as 50 - 55%.
My advice to all borrowers is ask questions and then ask more questions! What is the LTV? What goes into your LTV decision? What are you basing your quote on? I am sure if you keep looking you will find the right match.
Also keep in mind that experience may also be having an effect on the LTV ratio you are being quoted. Wish you the best of luck!
Gotta make a ton of offer to find a great real estate deal. In the same way, you have to make a ton of offers to potential private lenders to find one that will lend more than you are paying. If you make enough offers to find money, you will eventually get the terms you need. We have done over 300 deals where the lender provided the cash to purchase and rehab the house.
That's great you've been able to make that many deals. SFR's? Agree on ton of offers. However the challenge these days is finding the 1.2-2.4 multi unit deals. There are a lot of garbage deals (and sellers). I've cold called brokers, made phone friends w/ property managers (worked well) and talked to other BP'ers. However, In competitive markets (Cinci and Cleveland for instance), the good/great deals on multi units go to the locals and repeat buyers. As an out of state buyer, flying to your market makes a big difference. Flew to San Antonio last year to look at a property. The broker's kept in touch since.
Real Estate Agent · Salt Lake City, UT · Member since 2019 · 6 posts · 1 vote
6y
@Samuel Liapis I think you should look for a better deal or a better agent. You might have to get 80% from private and then 20% from another company. They aren’t gonna give you 100% financing if the pp isn’t significantly below arv.
Realtor · Cleveland, OH · Member since 2015 · 2k+ posts · 857 votes
6y
Just because it's not in or is in an investing book doesn't make it the law. Times change and lenders will change with it. Right now Covid is new and Lenders will want to protect themselves especially if you're not seasoned and don't have a track record of rehabbing properties.
I'd reach out to several lenders DIRECETLY and shop around and see what they tell you. Everyone out here giving their opinions from what I'm seeing is not a lender apart from @KB Collins
Realtor · Saint Charles, IL · Member since 2020 · 126 posts · 101 votes
6y
@Samuel Liapis
Just an idea here if you’re new you may want to look at possibly buying a turn key property from a company that can hand over a passive income where the numbers might be more solid and less risky than what you could find on your own. I see your from Chicago if you’re interested talk to @Mark Ainley. You could also think about a service like click invest or similar where you can leverage their experience and contacts. Going through the whole deal with you on a brrrr.