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All posts in hard money lending

BBRRR Investment Strategy (Boston’s Buy, Rehab, Rent & Refinance)

One of the best ways to invest in Boston real estate with little to no money out of your own pocket, is the BRRR strategy. BRRR stands for Buy, Renovate, Rent & Refinance. With this strategy the goal is to buy single or multifamily homes that need significant work. You would then renovate this property and bring it to current rental standards. Once the property is fully rehabbed, and rented, you would seek out permanent bank financing to pay off your construction financing.

Part 1: The goal is to create enough equity via your rehab, and to stabilize the property with tenants, that the banks will not require a down payment when you attempt to refinance. An ideal situation is laid out below.
Purchase Price – $350,000
Rehab Cost – $130,000
Financing Cost – $20,000
Total Invested = $500,000 (Refinance Amount)
ARV = $625,000
$500/ $625 = .80 or 80% LTV

Part 2: The second part of the equation, is making sure that your rents fully cover your monthly debts after refinancing. In other words you need your income to exceed your expenses and to producing cash flow for the banks to consider this a good loan. The numbers should look similar to below.
Total Rents Collected – $6,000 Monthly
Mortgage Payment – $2,000
Taxes & Insurance – $1,500
Other Cost = $500
Total Monthly Cost = $4,000
$6000 Rents – $4000 Expenses = $2000 Monthly Cash Flow

Want to see a current BRRR project in process? Come check out our latest 3 family investment as we prepare to bring this rental property back to life! This is a buy and hold deal that’s getting a full rehab. During the property tour we’ll explain:
• Exactly how we acquired the property
• How we raised the capital to purchase
• Our rehab budget & plans for the units
• Our timeline & issues we’ve had along the way
• Rental expectations & cash flow projections

For more details and to RSVP to the meeting, please visit the link below. Hope to see you there!

(BRRR Strategy) Buy, Rehab, Rent, Refinance – Property Tour!

Saturday, Mar 18, 2017, 11:00 AM

701 Walk Hill Street
02126 Boston, MA

56 Wealth Builders Attending

Come check out our latest 3 family investment as we prepare to bring this rental property back to life! This is a buy and hold deal that’s getting a full rehab. During the property tour we’ll explain:·  Exactly how we acquired the property·  How we raised the capital to purchase·  Our rehab budget & plans for the units·  Our timeline & issues w…

Check out this Meetup →

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Pros And Cons Of Using a Hard Money Lender

Whether you’re investing in a property to fix and sell, a landlord looking to invest in rental property, or a builder looking to get a construction loan, you’ve likely heard that hard money loans from private lenders are the best way to go. This all sounds like a no brainer but you should truly understand the difference between the two and if it makes financial sense for what you are trying to accomplish. Here we’ll talk about the pros and cons of choosing a hard money loan, and some things to expect when going through them.

Pros Of Hard Money Loans

  • Quick Approval: For Fix and Flips or construction loans, the borrower will typically be hard-pressed to get the loan within a certain amount of time that traditional lenders may have difficulty adhering to, due to the mountains of paperwork required and long standard approval processing times. With hard money loans, however, you can expect to close on a deal much more quickly – some within as little as 24 hours, for Boston we’ve average around 7 days. Once you’ve developed a relationship with a lender, the process can move even more quickly, allowing you to turn your properties around and make a faster profit.
  • Flexibility: because hard money lenders don’t use a complicated standardized underwriting process, they are able to evaluate each deal individually, and depending on your situation, and your relationship with the lender, you may have a little more wiggle room. This makes them much easier to work with than traditional lenders.
  • More Collateral Options: with hard money lenders, they are investing in the value of the property or properties themselves, not your individual credit. Due to this, they are typically willing to accept different types of collateral as long as the borrower can present profitable collateral to secure the loan. This means presenting them with solid plans for the property, as well as value of the land and the property as it is currently, to give them a better understanding of what they are working with. 

Cons Of Hard Money Loans

  • Higher Interest: the one major downside of hard money loans is the typically higher interest and fee rates due up front. The higher terms are due to the fact that they focus on the property value rather than the borrower, but may increase the risk on the borrower’s part. When choosing a hard money loan, make sure you’re managing your investments carefully and properly to avoid default or loss of property.
  • Short-Term Only: because they are private loans and are used primarily for the renovation, building, or flipping of property, many hard money loans are only available as a short-term means of financing. These usually range anywhere from 6 months to 2 years, and because of this the payments per month are typically higher along with the higher interest rates.

If you are interested in finding competitive rates for funding your investment real estate deal, check out one of our partners US Flip Funding. They make lenders compete for your business, ensuring you get the lowest rates in town.

For more information on Real Estate Financing or to learn from industry experts, feel free to contact us directly at Contact@Mandrellco.com or visit our networking group at Boston Wealth Builders where seminars are free but the resources are priceless.

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