BRRRR strategy / commercial SFR portfolio loans

[Tal Simpson]

We are about to do our first commercial mortgage on a portfolio of 7 SFRs on up to 80% LTV with a 20 amort / 5 yr balloon. We are inheriting tenants on 6 of the 7 and not planning significant rehab for the most part until the current leases expire over the course of the next 9 months, raising rents in the process. Our lender says the 80% LTV will be applied to the lesser of (1) appraised values or (2) actual costs of the houses.  We are doing this loan within weeks after closing.

For our next bundle of properties, we want to focus on the BRRRR method, maybe one house every 2-3 months if possible. By the end of a 12 month period or so, we'll have another bundle ready for a loan (and have been told by the bank they'll do another one with us). Will a commercial lender typically recognize the appreciated value after rehab irrespective of how low the property was purchased for, or is this a battle of valuation methods we need to prepare for?

Many thanks!