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BRRRR - Buy, Rehab, Rent, Refinance, Repeat

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Tyler Livingstone
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Real Estate Investing Loans

Posted Nov 4 2022, 06:56

Hello everyone 

Just looking to see what types of loans are out there for real estate investors.  We are looking to purchase homes in need of some repair (updating kitchen, bathrooms, and flooring) these types of things, not completely dilapidated.  

I have heard lenders say to use a fix and flip loan for the construction and cash out refi once complete.  I have used a fix and flip loan before and did not enjoy the high interest payments and the tight timelines.  Is there a long term loan that will purchase the property and fund the repairs as well?  

Let me know what you think.  Just looking for a loan that if the construction goes south and I need to find a contractor quick I can just continue paying the mortgage and don't have to worry about or 12% interest payments or fore closing because I can't cash out refi a property in mid construction.

Thanks 

Tyler 

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John Clevenger
  • Real Estate Broker
  • Indianapolis, IN
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John Clevenger
  • Real Estate Broker
  • Indianapolis, IN
Replied Nov 4 2022, 07:40

Tyler,

This is a great question as I feel like it is more common than you may think. 

I think there are limited loan options that would also pay for your rehab. I would suggest networking and trying to find a private lender. 

Private lenders can be very flexible and accommodating depending on the relationship and the property. 

It may also be beneficial to talk to a mortgage broker as they will know of many more options than a loan officer for a specific institution. 

Hope you are able to find your solution!

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Tyler Livingstone
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Replied Nov 4 2022, 07:59
Quote from @John Clevenger:

Tyler,

This is a great question as I feel like it is more common than you may think. 

I think there are limited loan options that would also pay for your rehab. I would suggest networking and trying to find a private lender. 

Private lenders can be very flexible and accommodating depending on the relationship and the property. 

It may also be beneficial to talk to a mortgage broker as they will know of many more options than a loan officer for a specific institution. 

Hope you are able to find your solution!


 Thanks!

Do have any brokers you have worked with in the past that you could recommend? My wife and I are Canadian but own a Ohio based real estate investing LLC.

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Andrew Postell
Lender
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#1 Creative Real Estate Financing Contributor
  • Lender
  • Fort Worth, TX
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Andrew Postell
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  • Fort Worth, TX
Replied Nov 4 2022, 08:28

@Tyler Livingstone thanks for posting.  If you are Canadian that will make investing in the US a little challenging.  Basically if you are purchasing a home to keep - it's handled a little differently than if you are going to flip.  Short term loans will always have a higher rate.  That's their nature.   No lender can make any money if they charge you the lower rates but you are only in it for 2-6 months.  That's a quick way to go out of business.  So everyone has to charge higher rates.  It's just part of the story here.  So when you are analyzing a property, make sure you are calculating your holding costs into the acquisition offer so that it's taken into consideration on your purchase price.

Now, because you are Canadian you will need a different loan AFTER the rehab is completed than we would normally get as US citizens  Bigger Pockets used to have a foreign national forum....but I cannot seem to locate it right now.  So the thing I would suggest here - search facebook for something like "Canadian US property investor" or "Canadian Real Estate Investing" or some combinations like that and then start asking other Canadians who are investing in the US what loans they are using for their properties here.  It might take some digging to find a good solution but that's what I would suggest.

Hope all of that makes sense. 

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Tyler Livingstone
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Replied Nov 4 2022, 09:25
Quote from @Andrew Postell:

@Tyler Livingstone thanks for posting.  If you are Canadian that will make investing in the US a little challenging.  Basically if you are purchasing a home to keep - it's handled a little differently than if you are going to flip.  Short term loans will always have a higher rate.  That's their nature.   No lender can make any money if they charge you the lower rates but you are only in it for 2-6 months.  That's a quick way to go out of business.  So everyone has to charge higher rates.  It's just part of the story here.  So when you are analyzing a property, make sure you are calculating your holding costs into the acquisition offer so that it's taken into consideration on your purchase price.

Now, because you are Canadian you will need a different loan AFTER the rehab is completed than we would normally get as US citizens  Bigger Pockets used to have a foreign national forum....but I cannot seem to locate it right now.  So the thing I would suggest here - search facebook for something like "Canadian US property investor" or "Canadian Real Estate Investing" or some combinations like that and then start asking other Canadians who are investing in the US what loans they are using for their properties here.  It might take some digging to find a good solution but that's what I would suggest.

Hope all of that makes sense. 


 Thanks for the advice!

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Luke Gibson
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  • Clearwater FL
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Luke Gibson
  • Investor
  • Clearwater FL
Replied Nov 6 2022, 15:20

most hard money lenders will lend on 100% of the rehab and about 70% loan to cost. The rates will get better the more deals you do. Hard money can be one of the best ways to get into it. There will be a down payment required to obtain the loan. I'd be able to help you with the down payment funds if you'd want to JV!

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Aaron Gordy
  • Real Estate Broker
  • Austin, TX
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Aaron Gordy
  • Real Estate Broker
  • Austin, TX
Replied Nov 7 2022, 13:47

@Tyler Livingstone Find a local bank lender that is doing construction loans. Establish a relationship with them. They will be considerably cheaper than hml. I have used hml before and I will in a pinch but only in a pinch as they are very expensive. 

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Eliott Elias#3 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
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Eliott Elias#3 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
  • Investor
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Replied Nov 7 2022, 21:32

Hard money: you don't want to hold too long, good for flips and distressed property 

DSCR: good for turnkey property or for the refi on a BRRRR

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James Wise#3 All Forums Contributor
  • Real Estate Broker
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James Wise#3 All Forums Contributor
  • Real Estate Broker
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Replied Nov 19 2022, 06:47
Quote from @Tyler Livingstone:

Hello everyone 

Just looking to see what types of loans are out there for real estate investors.  We are looking to purchase homes in need of some repair (updating kitchen, bathrooms, and flooring) these types of things, not completely dilapidated.  

I have heard lenders say to use a fix and flip loan for the construction and cash out refi once complete.  I have used a fix and flip loan before and did not enjoy the high interest payments and the tight timelines.  Is there a long term loan that will purchase the property and fund the repairs as well?  

Let me know what you think.  Just looking for a loan that if the construction goes south and I need to find a contractor quick I can just continue paying the mortgage and don't have to worry about or 12% interest payments or fore closing because I can't cash out refi a property in mid construction.

Thanks 

Tyler 

You'll have the most success in the BRRRR space if you can buy cash, finance the reno cash, and then refi out using a conventional 30 year loan.