Are loans under 100k available for BRRR?

Question

Hello, I new here and have a question about loans (both for purchase and refinancing) for the BRRR method, are loans under 100k available? From what I have seen most lenders for private money or hard money what loans for 100k or more, or else the ones that do smaller amounts just don’t advertise. I realize smaller conventional loans are available but I am not a W-2 wage earner, I do however have great credit and money available for a down. For example I see properties for sale for $80k that would have a small cash flow after some rehabbing and refinancing/pulling cash out, but if financing these would be difficult, then I need to look at properties over $100k. Your advice is appreciated.

Brittany Minocchi · Answer

For a rehab loan, generally the minimum is $100k (including a % of the purchase price and rehab funds). For a refi, there are lenders that will go a bit lower. On an $80k property, assuming 20% down, you'd need to roll in about $36k of rehab to hit that minimum. Depending on ARV, you'd want to make sure you can hit a $75-$100k loan amount for the refinance, so you'd take 75% of the ARV and see where you land. These are all rough estimates just to give you an idea.

Charlice Arnold · Answer

I have a lender that can do $50k minimum for refinance and $30k for rehab loans so it is possible.

Stacy Raskin · Answer

There are fix and flip loans where the total loan amount needs to be $100K between rehab, property purchase price and buyer down payment (usually 10-20% for a fix and flip loan depending on the property and borrower credit) (so the property before rehab can be worth less than $100K).

If you are looking for a loan for an investment property you won't be living in that doesn't require significant rehab / ready to rent / is already rented an option is a DSCR loan.

Some DSCR lenders will go down to a $75K appraised value and a $55K loan amount.

DSCR loans won't use your income to underwrite the loan.

DSCR loans are based off of down payment, credit score and either actual or market rents so it helps to supercharge an investor's real estate goals and net worth. Here's a bit more in detail about how rates are calculated for DSCR loans:1. Credit score- the higher the better. 760-780+ generally gets best pricing for investment property loans with most lenders. From there every 20 point increment affect pricing differently. So for example, a 761 credit score will be in the 760-779 credit category, then going down to 740-759 and so on.

2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.3. Prepayment penalties- usually 1-5 year terms. The shorter the prepayment term has an impact on increasing the rate.4. Are you cash flowing the property? More on how that is calculated below. Is your DSCR ratio greater than 1-meaning are you cash flowing (according to the lender's criteria of mortgage, property taxes and insurance (and HOA) if applicable). Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing takes a hit. This criteria is for 1-4 and 5-8 unit programs. I've included an example below to help illustrate this.So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.See example below:DSCR < 1Principal + Interest = $1,700Taxes = $350, Insurance = $100, Association Dues = $50Total PITIA = $2200Rent = $2000DSCR = Rent/PITIA = 2000/2200 = 0.91Since the DSCR is 0.91, we know the expenses are greater than the income of the property.DSCR >1Principal + Interest = $1,500Taxes = $250, Insurance = $100, Association Dues = $25Total PITIA = $1875 Rent = $2300DSCR = Rent/PITIA = 2300/1875 = 1.23

If a purchase, you also generally need reserves / savings to show you have 3-6 month payments of PITIA (principal / interest (mortgage payment), property taxes and insurance and HOA (if applicable). If a cash out refinance, many lenders will allow the cash out to satisfy the reserves requirement.

DSCR lenders generally let you vest either individually or as an LLC. It's a great way to increase your net worth and these loans can also be used to pull cash out of a property as it appreciates allowing you to reinvest money into new deals.

Happy to connect to discuss further.

John O'Leary · Answer

What @Brittany Minocchi outlined is correct. The only other option if buying turnkey is to do a small portfolio loan. Each property typically needs to be valued at $50,000, and depending on the lender you need a minimum of 3-5 properties. Portfolio loans typically have higher qualifying DSCR ratios (1.20+)

Mike Klarman · Answer

Yes, I have a good relationship with a lender that has a 50k min on Bridge loans. Lowest I ever seen.

Jake Baker · Answer

@Gabrielle Samprucci

Consider finding private money to fund the purchase and rehab. These lenders might be more open to financing smaller amounts, especially if they see potential in your project and trust your investment acumen.

Seller Financing - In some cases, the property seller might be willing to finance the purchase. This can be especially true for properties that are harder to sell or need significant work. Negotiate terms directly with the seller to create a mutually beneficial arrangement.

Are loans under 100k available for BRRR?

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