BRRRR Hard Money Lender and Refinance Fees?

Question

Hi guys!

So, I'm trying to do my first BRRRR in Kansas City, MO and I found a few Hard Money Lenders and they both do acquisition and rehab loans and I'm so amazed by how the expenses just accumulate with closing and refinance costs. I don't have much in reserves so I'm thinking I have to have/make/save a lot of capital for closing costs and finance fees. I wanted to get more inputs on this. This list below is what I've gathered are going to be my month to month expenses from beginning to the end of the BRRRR process. I'd like to know how this list looks. Is this an accurate list of expenses? Have you ever been in my situation and found a way to reduce out-of-pocket cost? If you've gotten the cost down, how did you do it?

SHORT TERM LOAN

Hard Money Lender

• 3500 origination fee
• 155 per draw for rehab
• HML 12 - 15% interest per month

Other

• Title fee = 1% of loan amount
• $700 hazard insurance
• $119 settlement fee at closing out the loan!

REFINANCE LOAN

Lender

• Origin = 2% of new loan amount
• 850 processing fee

Other

• Appraisal = 600
• 2nd title fee .75% of total loan
• 1 year of insurance upfront
• Tax proration: depends on when taxes are collected in that area - i get paid taxes that are collected by the seller for the year, i pay taxes for the rest of the year upfront

Andrew Postell · Answer

@Aaron Cabrera without knowing all of your personal details it might be hard for us to tell if these are high/good/bad/low/etc. However, I will say that if you lean on other local investors in that market (and it seems like you have one that has responded already) they should be able to provide you with some good recommendations. We always talk about networking with other real estate investors....and that's what you did hear with this post. So let's narrow it down to the right location and you should be a little better on your recommendations. Try posting in the Missouri forum. That will get a few more locals to respond to you.

Also, the other concept here to understand is that if you don't want to come out of pocket too much.....then offer less on the property. This is also why we usually make a lot of offers in our business. Don't get me wrong, making offers in the right way is very important....so we aren't even targeting MLS properties right now....but if the numbers don't work for you - offer less. It's not your fault they are asking too much.

Hope all of that makes sense.

Aaron Cabrera · Answer

@Andrew Postell Great response, Andrew! I remember and keep thinking to myself that I need to start looking for off market properties and make offers more often. I'm still on my 3rd month in this education phase and I've learned a lot! I appreciate this because it reinforces the fact that I need to get off the MLS and into looking for off market stuff. Repetition is the mother of skill. Thanks again!

Ramon Vazquez · Answer

@Aaron Cabrera that seems high. Shoot me a DM. I think you may be using one of the more expensive ones.

BRRRR Hard Money Lender and Refinance Fees?

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