Seeking Advice on Structuring a BRRRR Deal for a Foreclosed Property

[Daniel Taylor]

I'm currently looking into the BRRRR method (Buy, Rehab, Rent, Refinance, Repeat) and need some advice on structuring a deal for a house that's in foreclosure.

Here's a brief overview of my situation:

• Property Value: According to Zillow, the house is worth $649,500.
• Current Loan Amount: $470,000, which is the current market value without any repairs.
• Funding: I'm looking for a hard money lender to cover 100% of the purchase cost and rehab cost.
• Tenants: I already have tenants in place.

I'm working on getting the exact numbers for the rehab costs, but I would appreciate any advice on how to structure this deal effectively. Specifically, I'm looking for insights on:

1. Finding a reliable hard money lender who can finance the entire purchase and rehab costs.
2. Strategies to present this deal to the lender to increase the chances of approval.
3. Any potential pitfalls or things to watch out for in the BRRRR process, especially given the foreclosure status of the property.
4. Tips on managing the rehab while tenants are already in place.

Thank you in advance for your help!

[Erik Estrada]

Hey Daniel, 

Unfortunately, in this market, finding a hard money lender to finance the entire purchase and rehab is unrealistic. You may be able to get away with 10% down if you have multiple fix and flips/holds completed in the last 36 months and the LTARV allows for it. 

[Daniel Taylor]

Quote from @Erik Estrada:

Hey Daniel, 

Unfortunately, in this market, finding a hard money lender to finance the entire purchase and rehab is unrealistic. You may be able to get away with 10% down if you have multiple fix and flips/holds completed in the last 36 months and the LTARV allows for it. 

what if im able to fund 100 percent of rehab myself, would i be able to secure 100 percent of loan for purchase?

[Erik Estrada]

Quote from @Daniel Taylor:

Quote from @Erik Estrada:

Hey Daniel, 

Unfortunately, in this market, finding a hard money lender to finance the entire purchase and rehab is unrealistic. You may be able to get away with 10% down if you have multiple fix and flips/holds completed in the last 36 months and the LTARV allows for it. 

what if im able to fund 100 percent of rehab myself, would i be able to secure 100 percent of loan for purchase?

No. Most hard money lenders will cut the initial loan amount on the purchase, if the rehab is self funded/financed. 

BUT if you cross collateralize with another property you own that has equity, you'll be able to get closer to 100% CLTV.

[Connor Hibbs]

Hi Daniel, 100% financing for your project really isn't very feasible in this market. Depending on your experience you'll likely be somewhere between 75% - 90% of the purchase price and possible up to 92.5% if you have lots of experience as well as experience in the area. Also, like Erik had mentioned, lenders will typically cut from the initial advance to ensure that the full rehab is funded. From the lenders point of view, they want to see that you have "skin in the game" that way if you do run into any complications, you'd be more motivated to address them as you are invested financially in the project yourself.

Regarding the tenants, I'm a bit less experienced in that regard. I do know that the level of rehab you're doing and your timeline for completing the rehab will play a role in your options.