How To Finance BRRRR Properties
One of the most difficult obstacles for starting investors is figuring out how to finance BRRRR properties. Commonly, you will have to finance the property more than once. First, when you purchase the property, and second for any repairs or improvements. Most beginning investors don’t have the funds to finance the property without a loan. If you are purchasing a property for the first time, here are a few options open to you:
- Conventional Bank Loans: As a down payment, you will need about 20% – 25%. However, the interest rate should be similar to that of an owner-occupant loan. It is important to note that if the property is in poor enough conditions, the bank may not offer you a loan to purchase it.
- Local Bank Loans: Local banks offer a more significant amount of flexibility when lending for rental properties. While they will most likely require the same down payment as conventional bank loans, they may also overlook any expenses for repairs. They also offer flexibility on mortgage limits and debt-to-income ratio problems.
- Private Lenders: Private money is acquired by people you know personally, whether it be family, friends, business partners, or other investors. In this case, the rates can vary depending on the property and your relationship with the lender. It is common for private lenders to also finance any repairs the property needs.
- Hard Money Lenders: These lenders specialize in lending to house flipping and rental investors. The cost and rates of hard money lenders commonly exceed bank loans. However, they will most likely cover repairs and improvements.