Banks that will work with BRRRR stratedgy

[Nathan Moore]

I'm looking for a bank or banks in Texas that are interested in working with the BRRRR method of investing. The local/community banks dont seem interested and they all want to use variable interest loans. Does anyone have bank recommendations for cash-out refi with fixed interest loans in TX?

[Jeff Copeland]

If you are contacting lenders and asking them if they "are interested in working with the BRRRR method of investing", two-thirds of them probably have no idea what you are talking about. 

The fact that you are employing a BRRRR strategy really has nothing to do with the lender's appetite for the refinance.

You should be looking for lenders who are interested in doing conventional refis (which is pretty much all of them, that's what they do: purchases and refis). In other words, you're not looking for anything special, just a conventional lender who is responsive, has good customer service, stays on top of the underwriting process, etc. On that note, you may have better luck with mortgage brokers (who can shop around for multiple loan products/options for you) than with local banks. 

Admittedly, you may find that underwriters are being somewhat conservative with all of the uncertainty in the economy, inflationary pressures, interest rates, etc. But, if anything, the refi business has dried up compared to a year ago, and they should be eager for new business. 

[Jordan Moorhead]

@Nathan Moore what is the problem you're running into?

[Jay Hurst]

are you running into seasoning issues?  meaning the banks what you to have owned the home longer before they will allow you to use the rehabbed value?  

[David M.]

@Nathan Moore

What specifically is the issue that is cropping up?

Are you using a LLC? Legal entities aren't eligble for conforming residential loans. That forces you into "commercial" lending. Quit claiming Title is a common lender recommendation which helps the lender sell a loan, but doesn't necessarily help protect your LLC's corporate veil.

Are you trying to refi before 6months after purchase?  Fannie Mae guidelines/requirements is the Title needs to be "quiet" (I forget the technical term) for 6 months.  So, even if you purchase in cash, you can't get a conforming loan before 6 months.

Any other specific terms that you are looking for?

I believe some of the larger, National bpl lenders will provide 30yr term and amort on a LLC property. I'd guess they'd do the same for one that is personally owned. However, the rate isn't normally as good as a conforming loan. But, with conforming rates rising, not sure where the commercial rates are at this time.

Be helpful if you had anymore info to share.  I'd be happy to chat if you'd like, send me a direct message.  Good luck.

[Andrew Postell]

@Nathan Moore thanks for posting!  Always great to hear from a fellow Texan.

Now, I can't tell if your property is in Dallas....or if it's in Canton...but in either case there are LOTS of lenders that we work with as investors in this part of Texas. You'll need 2 lenders for the BRRRR method - one for the BUY step and one for the REFINANCE step. But you can certainly find lenders. Have you been to some local real estate investing groups? There are lots in our area and getting a recommendation from a local real estate investor is always the best practice. Feel free to post if you need anything else. Thanks!

[Andrew Syrios]

Go to your local REIA and ask which banks other investors are using in your area. (Investors will share banks like it's nothing but won't give up their contracts for solid gold.) If they're doing cash out refinances after a short seasoning period with other investors, they're likely to do so with you.

[Nathan Moore]

We own 5 SF rental houses outright and have for a few years. We own 3 with adjustable int loans (very low debt to equity rations on all 3) from a local/regional bank that will not do cash out refis. I've approached another local/regional bank in the area and they were not interested in doing that either. I think for a primary home they will but not for investors. 

We also purchased a "5 plex" (2 duplexes and a single unit all together) last year with seller financing and a 5 year balloon that i'll need to get LT financing on in 3-4 years. All of our properties are stable, not over leveraged, and well seasoned. I have a very good W-2, superior credit, very little personal debt, and my wife is a very successful realtor in the area. So, banks do not see us as any sort of lending risk.  

We have >$1MM in equity tied up in these units right now. I have some cash reserves and a LOC to operate with but our philosophy of carrying very little debt has slowed our ability to scale up. I'm just wondering what banks or lenders other investor have had success with when deploying their BRRRR method (i would never mention "BRRRR" to a lender). Cash-out-refi is what i'm looking for but striking out with my two local banks and Fairway Mortgage.

[Nathan Moore]

David M.- Yes, we own all of our properties in our LLC. That could be a problem as you point out.

[Jay Hurst]

You should have no issue getting cash out on the SFR even with vesting in a LLC. We do it everyday. Local banks do not generally have a significant menu of products.

[Eliott Elias]

What you're looking for is a lender that will cash out refi using DSCR loan. Shoot me a DM, i have a guy