You’ve likely heard about the BRRRR method, which stands for Buy, Rehab, Rent, Refinance, Repeat. Using this method, investors are “buying and holding” properties for rental, rather than “fixing and flipping.
We often get asked what kind of loan program we have for these buy and hold scenarios. Our buy and hold loan program is essentially the same as our anything you would use for a fix and flip. We would fund 90% of the purchase price and 100% of the rehab costs, up to 65% of the ARV.
The significant difference is the exit strategy. When our underwriters are reviewing a property that the borrower intends to refinance, they’re looking to make sure that the borrower is in a position to be approved with a bank that will be buying them out of their hard money loan.
Hard money lenders offer looser regulations as far as documents and credit score than traditional banks do. So while we may approve someone for a loan with a 620 credit score, a conventional lender may not be willing to refinance that same borrower and therefore, the borrower could end up stuck in the hard money loan. Our underwriters are looking at the long term plan for a borrower during the approval process.
The good news is, we now offer in-house solutions for your refinancing needs. Alpha Funding now offers a rental loan program. Take a look at some of the basic information below and contact us to get started.
Term: 5/1 Arm 7/1 Arm or 30 year Fixed – No Renovation / Rental Ready
Single Family, 2-4 Units & Mixed Use
Loan Amount: $100,000 – $2.5M
Min fico: 620+
Up to 80% of Purchase Price / As – Is Value
Up to 80% Refinance without cash out
Up to 75% Refinance cash out
Rates: starting at 5.99%
Origination fees: 2 – 3%