Brrrr financing options

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Brrrr financing options

James Krell
Investor · Orlando FL · Member since 2019 · 24 posts · 6 votes

My partner and I are doing our first brrrr. Here’s the numbers

PP 150,000

Hard money loan-135k

Repairs-15k

Signed lease of $1650 per month.

ARV 220k

My hard money lender offers two loans that keep the property in the Llc.

Option 1 80% new appraised value 30 year fixed

5% apr

Option 2 10/1 arm. 5% Interest only for 10 years and then libor + 5.

I’m torn between cash flow and paying down the asset.

Curious to see what you guys think.

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  • Lucas Miles
    Rental Property Investor · Fairmont, MN · Member since 2019 · 184 posts · 123 votes
    5y

    @James Krell assuming this is this a SFR? I would shop this around to some local lenders, if this is a SFR you should easily be able to get a rate at ~3% fixed, amortized for 30 years (in my area most lenders only go 75% LTV, but there is a couple that will still go 80% LTV). Reach out to some local investors in your area for lender recommendations. If you planning on holding this property for long term, get loan that locks the interest rate in for 30 years. Interest rates are historically low right now, being able to lock that rate in for 30 years in awesome. Unless you only plan on holding onto this property for a few years, I would absolutely be paying down the principal on the loan.

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  • George DespotopoulosBusiness Member
    Lender · New York, NY · Member since 2016 · 936 posts · 287 votes
    4y

    @James Krell you may be able to get a 30 yr fixed DSCR/property cash-flow loan at 80% LTV for a 4.75% - 4.875% rate and even lower for a 75 LTV on 30 yr fixed. Both are without buying down.

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  • Allen McGlashing
    Investor · Cambridge, MA · Member since 2017 · 195 posts · 106 votes
    4y

    @James Krell

    This looks good on paper. You will be coming out of the deal making money after the cash-out refinance so the COC return is infinite. What would the cashflow be with the new 30yr loan? At 80% of the appraised value brings you just under the 1% rule.

    With a hard money lender 5% for a 30 yr amortization loan seem about right to keep it in a LLC. I wouldn't risk the 10/1 ARM because I don't think in 10 years the rates will be as low as they are now.

    As long as it has PURE cash flows I would pull the trigger using option #1.

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  • Robin SimonBusiness Member
    Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
    3y

    such a good example of the lack of the "floating rate Armageddon" people seem to be predicting every now and then. Even if you went with the ARM back in 2021 - still got 8 years left of low fixed rate debt!

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