BRRRR Strategy Roadblock (for me)

[Hunter Hebert]

I am currently wholesaling and have a handful of rentals in the Denver market. As of 8 months ago I began doing flips in Houston simultaneously with a "boots on the ground" partner. We want to collectively build a rental portfolio in Houston due to price point and the ROI we are witnessing there vs. in Denver.

We are interested in adopting the BRRRR strategy in Houston. We can pay cash for the purchases and we have the crews to do the renovations and we have the knowledge to draw leases and get paying tenants in all of our units.

BUT...Every lender we speak with requires seasoning requirements of at least 12 months. This disables us from being in a rental with no money out of pocket, which makes the entire model fruitless in our minds. We will just do conventional financing from the beginning if this is the case, but it will not enable us to scale up as quickly as desired. 

Mr. Ian Reeves inspired me a few weeks back on the podcast(#237) and is currently using commercial lending to forego seasoning requirements. We are more than willing to go this route if need be. My question to him or anyone else that is successfully doing this is, what lending institutions, either commercial or conventional, allow for no seasoning requirements? All I've been getting was no's and a couple laughs mixed it.

Moving forward, I am more than willing to move a hunk of cash, the same hunk of cash we will use to purchase these rentals, to any institution that will allow this and in doing so start a relationship with said institution. We're going to give whichever institution we choose a ton of business and we have the income, both from real estate and other businesses unrelated to real estate, to back these loans up if we happen to come across problematic tenants or have major issues on a particular property that were unforeseen. We have an exceptionally thorough diligence process so none of this should happen, but it still happens to the best of us.  

Please lend me your insight or throw me some contacts. Thanks in advance for any help!

[Hunter Hebert]

Thanks again for responding. 

He said he was using some a commercial lender to forego the seasoning requirements but no commercial lender I have spoken with said that they would do that. Like I said, I get mostly laughs and "good lucks" when I ask. Guess if it seems to good to be true it usually is. 

I'm not really sure what the point of the BRRRR strategy is relative to just going conventional from the beginning. Waiting six months between acquisitions to pull cash out to do it again is way too slow. We want to do at least one of these every six weeks, not every six months.

Thanks anyways. I'll keep fishing.