BRRRR - Trouble getting Financing

4 Replies

I am getting ready to purchase a commercial property that has apartments upstairs and businesses downstairs - already fully occupied. We are buying off market, and feel like we are getting a good deal. We are buying this property with our LOC, so a "cash" purchase. However, we want to refinance right away, pay off the LOC + repairs, and take some cash out to purchase more properties (BRRRR method). Most banks are telling me they will only lend 75% of the purchase price + repairs. I'm pretty confident this property will appraise for more than doubled our purchase price. I've talked to most of the local banks, and they are giving me the same answer - 75-80% of purchase price + rehab. Is there no way around the "seasoning period"? Also, are there any lenders out there that would lend me 75% LTV on the appraised value, with decent terms? Thanks!

@Mark Delosreyes Commercial loans will be underwritten based on NOI and Cap rate, not on market comps. You mentioned the building is fully leased, so your income is most likely going to be fixed until the end of those leases, whether or not you put in money for repairs.

75-80% is common LTV on commercial loans. If you can increase income / reduce expenses enough to meet your target appraisal number, you may be able to get the loan size you're looking for.

Many banks have a seasoning requirement, i.e. you have to own the property for so long before they will refinance at appraised values. Most won't lend on appraised value right away unless you at least put some rehab money into it. You should ask these banks about their seasoning requirements. Hopefully you can find one that is rather short and use them.

Thanks for the feedback. We found a lender that can handle the 75% LTV of appraised value, without the seasoning period. Yes, using the income approach, we should easily hit our valuation target. Thanks again, and wish us luck.

Originally posted by @Mark Delosreyes :

Thanks for the feedback. We found a lender that can handle the 75% LTV of appraised value, without the seasoning period. Yes, using the income approach, we should easily hit our valuation target. Thanks again, and wish us luck.

Hey Mark are they a national lender by any chance? If so could you message me their information? Thanks buddy.

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