Bridge Loan for first BRRRR

[Kristin Riker]

Hello All,

I'm looking to do my first BRRR deal in Tampa and the lender I have found is suggesting a bridge loan (I would pay for rehab separately) then refinance into a 30 year fixed mortgage in approximately 4-6 months. I don't know ANYTHING about bridge loans....Pros/Cons?? I understand they are typically a higher rate and you must refinance within a year. Is this common practice for BRRRRs?

Thanks for any insight...

[Robin Simon]

Quote from @Kristin Riker:

@Jaron Walling

Purchase price $235

Rehab estimate $20k (I calculated with 25k as I know rehabs tend to go over budget)

Future rents $3000 (total from both units)

Cash flow $385/month (after budgeting for PM, CAPEX, repairs, vacancy and utilities I would be covering)

ARV $299

These numbers look like a solid deal - and yes, the bridge loan being 4-6 months is generally standard. For BRRRR deals that you are going to finance with hard money (bridge debt) instead of all cash, best practice is to use a lender that offers both bridge and the long-term refinance loan. If you use just one lender, then even with a short term (4-6 months), since your refinance will be with the same lender, there will likely be much more flexibility on extensions, timelines on the refinance and much headaches, paperwork avoided since you have already done a loan with them