Does anyone have a good contact in Oklahoma City of a lender who will do investor loans on houses purchased using the BRRRR strategy?
Try to find a smaller local regional bank, make sure you have a good "presentation" for them when you go in and discuss what your plan is.
I have used First United bank for all my deals.
@Jaren Woeppel Are you paying cash up front or financing it up front? I have heard First Enterprise on Britton will finance after 6 months seasoning. I have personally used Arvest and BancFirst, which look for 12 month seasoning terms. I agree with @Dylan B. - presentation is big. They need to feel good about their risk.
@Jaren Woeppel With cash up front, you have plenty of opportunities. Go with any local bank, like the ones mentioned above, and you should be fine. It seems to me that most banks are looking for six months' rental history in the subject property for unproven investors (unproven to them, at least). So you would need repairs done, and a renter in place for 6 months. I'm sure those terms get more agreeable once you have done a few deals for that particular bank. Or if you wow them during your initial presentation. I can provide you contacts at Arvest and BancFirst if you want. PM me.
@Levi Ballard What are some strategies you've used without cash up front?
@Jeff West , bank financing up front is what I usually do. Its not ideal, but I have offered on a couple houses and asked for $1500 - $2500 in closing costs to be paid by seller. They usually agree to this as long as their net is where they want it to be. No limit on what you can ask for with a commercial note, too - if the closing costs are less than the amount agreed to, it jus gets applied to the down payment. This ensures that the money I have in the house is in the equity of the house, not financing fees. Then I take possession, rehab it (if needed), and then refi it 12 months later. Closing costs on the refi are minimal compared to the original purchase (especially if staying with same bank), and they will roll it into the new loan. I like using the same bank for both transactions because of the loyalty factor and favorable terms. I'm not buying a tremendous amount of properties, so I'm fine with my capital being tied up for the twelve months. I've done cash up front, and there are a lot of advantages, but with more and more banks asking for longer seasoning periods, it ties up even more of my capital for almost the same amount of time.
Reading through the thread, and I'm not sure what "seasoning" means exactly? If you purchase a property with cash, the bank will not give you a mortgage until you've owned and rented for some period of time? Or is that only if you are refinancing?
@Levi Ballard , can you explain how closing costs are minimal for a refi when using the same lender? I just refi'd my primary residence, and the fees were unpalatable to say the least. 4-5k. But I used a new lender.
@Chris Sullens Seasoning is the period of time that the bank requires you to own the house before they will refinance with an updated appraisal.
Say you buy a house for $40k and you put $10k into it. Its worth $100k now. Assuming you pay cash, the bank will give you 80% of $50k ($40k) the day after you finish rehab. If you wait out their seasoning period, they will give you 80% of $100k ($80k).
Its different for every bank. Some banks don't have a seasoning period. Some require 6 months ownership, some 6 months of rental history, and some 12 months of ownership. I'm sure there are all kinds of requirements. The key though is the updated appraisal. Most banks will offer you 75-80% of the lower of the appraisal price or your costs (purchase price if you mortgage initially, purchase price and rehab if you pay cash up front).
Refinance costs can be lower because you don't have prepaids (if you are escrowing your insurance and taxes), and banks will usually lower their origination fee, title fees. Since the property is not changing ownership, you don't have to pay the title company fees either. You can 'close' at the bank, and skip the title insurance, etc.
Very helpful answer! Thank you @Levi Ballard . I wish I had known that before! I had to pay all kinds of title fees and title insurance, which I thought was pretty ridiculous at the time, but didn't know how to avoid it.
Can any one assist me with putting together a "Presentation" for a Portfolio Lender?