18. BRRRR and Loan Requirements

This is the next installment in a multi-post series on financing your rental investment properties using the BRRRR strategy.

Typically, the BRRRR strategy begins way before making an offer on a property.

First, speak to several lenders to better understand what type of loan programs are available such as a 5/1, 7/1, 10/1 ARM’s or 30 yr. fixed. What’s the average interest rates, amortization, pre-payment penalties, costs, fees, DCR, seasoning period, etc.

Second, do you finance with a conventional lender purchasing in your own name or a commercial lender purchasing in an LLC?

Side note – I have written extensively in previous posts regarding loan programs and types of lenders. Refer to them for more insight.

Third, you need to understand what the minimum loan requirements are. Most lenders have a minimum loan amount and rent for an SFR. Some exceptions may be considered for larger rental portfolios or multifamily refi’s.

Most commercial lenders require at least $75K ARV, $50K minimum loan amount and $750 rent for an SFR. For duplexes up to an 8-plex, they want to see $50K+ value per door and $650+ rents. Typically, 90% of any rental or multifamily portfolio need to meet the lender minimum requirements.

There are lenders who offer more customized programs and exceptions depending upon the size and location of the properties. For example, I have our SFR3 loan program. It’s a 30 yr./30 yr. am loan with a minimum of $50K ARV and $750 rent. It requires at least 3 properties to be refinanced together in a portfolio loan. It’s a great program to unlock your funds that would have been otherwise committed indefinitely and recapitalize into other projects.

So, before submitting an offer on a property you designated as a BRRRR, think strategically, and know what your lender requirements are when seeking to refinance. You will then know which properties fit your BRRRR purchase criteria.

Looking for funding? REI Trader, LLC has purchase, refi and fix and flip loan programs for your SFR, rental and multifamily portfolios. For rates and terms, please email jonathan@reitrader.com

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