Work with only one lender?

[Mitchell Wyatt]

If I'm planning to BRRRR do I need to work with the same lender for my initial loan and the refinance? For anyone who is an expert on BRRRR please give me some insight into how you structure your financing.

[Stephanie P.]

Originally posted by @Mitchell Wyatt:

@Dan Gamache where do you find a "fix n flip" loan?  I've only talked to a few banks so far but all of them have told me they can't include the cost of the rehab in the initial loan.

There are several tiers of financing out there.  You've got conventional financing which is Fannie Mae and Freddie Mac.  Then you've got portfolio lenders that don't necessarily conform to Fannie Freddie underwriting standards but to the guarantor's credit and the property's cash flow.  Then there are hard money lenders who lend based on the property, the guarantor's credit and the after repair value.  To get a renovation loan that you're not going to live in, it's okay to use a hard money lender.  They will lend between 70-90% loan to value based on the purchase price and the borrower's experience and then 100% of the rehab paid out in draws as the work is done.  The max loan to value based on the after repair value is usually 70-75%.  This is usually an interest only, short term loan and more expensive than cash, but if the numbers work, the numbers work.

There are some institutional lenders out there that will do the initial purchase/renovation and then the long term financing, but generally speaking, you'll have 2 closings; one for the initial purchase and the next for the take out loan which is a fully amortizing loan. 

Hope that explains it.

Stephanie