Hard money loan repayment ? for brrrr deal DSC question

Hartford, Connecticut
BRRRR - Buy, Rehab, Rent, Refinance, Repeat
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Hard money loan repayment ? for brrrr deal DSC question

Michael NelsonPro Member
New London County, CT · Member since 2021 · 55 posts · 18 votes

Hi everyone, heres my BRRRR situation

purchase price 520,000

rehab 25,000

Appraised at 600,000

Rents are now at 1950, 1850 and 1600 totaling 5400

My question is can i get a DSCR to take out all 545,000 as the rent roll to to a mortgage for that amount would ratio out to around 1.4 but....obviously appraisal is not high enough for 80/20

Any info on this or suggestions would be great. Trying to get as much as possible back out

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Deborah Wodell
Lender · Sanford, NC · Member since 2024 · 351 posts · 117 votes
1y

The appraisal is definitely a key factor here. Most lenders will cap the LTV at 75-80% of the appraised value, which means pulling the full $545K may be challenging. Another possibility is ordering a second appraisal—sometimes values can vary between appraisers, and a fresh report might come in higher. If the market in your area is trending upward, waiting a little longer could also help increase the appraised value.

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  • Taylor DaschBusiness Member
    Real Estate Agent · Temple, TX · Member since 2022 · 1k+ posts · 700 votes
    1y

    You either have to leave money in the deal, find a lender who will do a higher LTV, or flip and cash out. But you didnt have too much room on this one in the first place. What was your initial plan? Even if they do 85/15 your going to have to leave money in it.

    [email protected]254-718-4249
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  • Zach Edelman
    Lender · New York, NY · Member since 2022 · 1k+ posts · 1k+ votes
    1y

    80/20 might be tough, but I think you can definitely achieve 75%. Worst case you can have your loan be "Partial Interest Only" which means the first 10 yrs of the loan are interest only, and the following 20 are fully amortizing. The lender should be able to go off the interest only payments for their DSCR calculation, and what this allows for is a higher DSCR, and as a result, higher/more allowed LTV. Hope this helps/makes sense!

    0Reply
  • Devin PetersonBusiness Member
    Lender · Sarasota, FL · Member since 2022 · 2k+ posts · 667 votes
    1y

    Hey Michael,

    Local to you in Middletown here I would love to connect and chat more about this one.

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  • Samuel Eddinger
    Meriden, CT · Member since 2018 · 702 posts · 501 votes
    1y

    @Michael Nelson - I'd recommend you speak with @Devin Peterson

    1Reply
  • Michael NelsonPro Member
    OP
    New London County, CT · Member since 2021 · 55 posts · 18 votes
    1y
    Quote from @Taylor Dasch:

    You either have to leave money in the deal, find a lender who will do a higher LTV, or flip and cash out. But you didnt have too much room on this one in the first place. What was your initial plan? Even if they do 85/15 your going to have to leave money in it.


     My initial plan was tat it would appraise higher. Im working on getting another appraiser over there in hopes i can get mid to high 6's

    0Reply
  • Michael NelsonPro Member
    OP
    New London County, CT · Member since 2021 · 55 posts · 18 votes
    1y
    Quote from @Zach Edelman:

    80/20 might be tough, but I think you can definitely achieve 75%. Worst case you can have your loan be "Partial Interest Only" which means the first 10 yrs of the loan are interest only, and the following 20 are fully amortizing. The lender should be able to go off the interest only payments for their DSCR calculation, and what this allows for is a higher DSCR, and as a result, higher/more allowed LTV. Hope this helps/makes sense!


     Interesting thought! Thats why I love these forums. You get all different outlooks. Definitely something to think about. Im in the scaling phase so getting as much money out of each deal to add another is most important to me. I live in an area where rent appreciate quite a bit so it will always make money long term. 

    Thank you

    0Reply
  • Michael NelsonPro Member
    OP
    New London County, CT · Member since 2021 · 55 posts · 18 votes
    1y
    Quote from @Devin Peterson:

    Hey Michael,

    Local to you in Middletown here I would love to connect and chat more about this one.


     PM sent 

    0Reply
  • Taylor DaschBusiness Member
    Real Estate Agent · Temple, TX · Member since 2022 · 1k+ posts · 700 votes
    1y
    Quote from @Michael Nelson:
    Quote from @Taylor Dasch:

    You either have to leave money in the deal, find a lender who will do a higher LTV, or flip and cash out. But you didnt have too much room on this one in the first place. What was your initial plan? Even if they do 85/15 your going to have to leave money in it.


     My initial plan was tat it would appraise higher. Im working on getting another appraiser over there in hopes i can get mid to high 6's


     Maybe try a BPO - this will be cheaper but not as detailed and should give you a general idea of the market - its much more expensive and time consuming to get an appraiser if your going to do multiple of them. 

    [email protected]254-718-4249
    Taylor Dasch | EG Realty561 Reviews
    WebsiteView Page
    1Reply
  • Michael NelsonPro Member
    OP
    New London County, CT · Member since 2021 · 55 posts · 18 votes
    1y
    Quote from @Taylor Dasch:
    Quote from @Michael Nelson:
    Quote from @Taylor Dasch:

    You either have to leave money in the deal, find a lender who will do a higher LTV, or flip and cash out. But you didnt have too much room on this one in the first place. What was your initial plan? Even if they do 85/15 your going to have to leave money in it.


     My initial plan was tat it would appraise higher. Im working on getting another appraiser over there in hopes i can get mid to high 6's


     Maybe try a BPO - this will be cheaper but not as detailed and should give you a general idea of the market - its much more expensive and time consuming to get an appraiser if your going to do multiple of them. 


     What is a BPO? 

    0Reply
  • Deborah Wodell
    Lender · Sanford, NC · Member since 2024 · 351 posts · 117 votes
    1y

    The appraisal is definitely a key factor here. Most lenders will cap the LTV at 75-80% of the appraised value, which means pulling the full $545K may be challenging. Another possibility is ordering a second appraisal—sometimes values can vary between appraisers, and a fresh report might come in higher. If the market in your area is trending upward, waiting a little longer could also help increase the appraised value.

    2Reply
  • Alex BekezaBusiness Member
    Lender · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
    1y

    75% will be the industry standard for max cash out.  However, 80% is typically available as a rate/term aka limited cash out refinance (cash out just being used to cover closing costs and prepaid items like taxes/insurance).

    Your phenomenal DSCR is just a cherry on top. Lenders will base their max LTV on the appraised value assuming positive DSCR. However, they will not let strong DSCR drive them beyond their typical LTV caps.

    Do you see strong comp support for a higher appraised value? If so, a second appraisal could be warranted.  I'd just make sure you have 2-4 unit properties that are superior that were not already used in the previous report and are in some way more comparable (closing in proximity or date of sale etc)

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    • Michael NelsonPro Member
      OP
      New London County, CT · Member since 2021 · 55 posts · 18 votes
      1y
      Quote from @Alex Bekeza:

      75% will be the industry standard for max cash out.  However, 80% is typically available as a rate/term aka limited cash out refinance (cash out just being used to cover closing costs and prepaid items like taxes/insurance).

      Your phenomenal DSCR is just a cherry on top. Lenders will base their max LTV on the appraised value assuming positive DSCR. However, they will not let strong DSCR drive them beyond their typical LTV caps.

      Do you see strong comp support for a higher appraised value? If so, a second appraisal could be warranted.  I'd just make sure you have 2-4 unit properties that are superior that were not already used in the previous report and are in some way more comparable (closing in proximity or date of sale etc)


       Thank you for the detailed response I thought this was the case. Im shooting for another appraisal. 

      0Reply
  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    1y

    Hi Michael, 

    You should be able to do this as a delayed purchase cash out refinance at 75 LTV or, depending on how much you owe, an 80% LTV limited cash out rate and term refi.

    There are lenders that can do an 80 LTV cash out refi, however the rate will be pretty high. You could also structure this on a bridge loan at 80 LTV, having any additional cash out, held back for monthly payments.

    [email protected]818-269-7983
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  • Jay HurstBusiness Member
    Lender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
    1y
    Quote from @Michael Nelson:

    Hi everyone, heres my BRRRR situation

    purchase price 520,000

    rehab 25,000

    Appraised at 600,000

    Rents are now at 1950, 1850 and 1600 totaling 5400

    My question is can i get a DSCR to take out all 545,000 as the rent roll to to a mortgage for that amount would ratio out to around 1.4 but....obviously appraisal is not high enough for 80/20

    Any info on this or suggestions would be great. Trying to get as much as possible back out

     @Michael Nelson    Do you have current financing on the property or did you purchase/rehab with cash? 

    Hurst Real Estate, INC4.991 Reviews
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