Question on BRRRR Method

2 Replies

When you are purchasing a rental for the brrrr method. Can you use a conventional bank loan such as a 15 or 30 year loan instead of using a hard money loan or private money loan? Or is using loans with a quicker payback period and higher interest rates better for this particular method.  

@Justin Harris

You can do it any way the numbers work.  Cash is best.  Hard money and then either conforming or portfolio is good if you bought it right.  Portfolio money by itself works too if it cash flows.  One of the "r's" is repeat though, so remember you're going to be limited by the number of conforming loans you can get versus portfolio money, where there is generally no restriction on the number of financed properties.

Hope that helps

Stephanie

Hi Justin,

Can you use a conventional bank loan such as a 15 or 30 year loan instead of using a hard money loan or private money loan? Or is using loans with a quicker payback period and higher interest rates better for this particular method.

You can use a bank, although the loan structure they would likely propose if you are using the "BRRRR" strategy would be more of a bridge-to-perm type structure whereby they finance a portion of the purchase, the rehab, and then refinance on the back-end after a seasoning period.

Real estate investors often use hard money lenders for the front portion of the "BRRRR", namely the Buy and the Rehab, because it is more difficult to procure bank financing if a property requires significant repairs.

Banks will be a cheaper option, but may be less flexible than a private or hard money lender.

Best,

Michael