How to Guarantee 100% Financing for BRRRR Properties

Investing in BRRRR properties (Buy, Rehab, Rent, Refinance, Repeat) can be a great way to grow your real estate portfolio. However, one big question always pops up: How to guarantee 100% financing for BRRRR properties? With some careful planning and understanding of the numbers you can set yourself up for success. Let’s walk through the steps.

Step 1: Know Your Maximum Loan Amount

Before diving into the deal, you need to know how much your lender will finance. This comes down to two key numbers: your After Repair Value (ARV) and your lender’s Loan-to-Value (LTV) ratio.

What is ARV?

ARV is the expected value of your property after repairs. It’s what you can sell it for or the appraised value when you refinance.

Loan-to-Value (LTV)

LTV is the percentage of the ARV that your lender is willing to lend. Most lenders offer 70-75% of the ARV. So, if your property’s ARV is $200,000, and your lender offers 75% LTV, they’ll lend you $150,000.

Here’s a quick example:

• ARV: $200,000
• LTV: 75%
• Maximum Loan Amount: $150,000

Step 2: Fit All Costs Under Your Loan Amount

To guarantee 100% financing, all your costs need to fit under the maximum loan amount. Your costs typically include:

• Purchase Price
• Rehab Costs
• Closing Costs

For example, if your maximum loan is $150,000, your purchase price, rehab, and closing costs need to total $150,000 or less.

Example:

Let’s say you have the following costs:

• Purchase Price: $100,000
• Rehab: $40,000
• Closing Costs: $5,000

Total costs = $145,000. Since this is under your $150,000 maximum loan, you can cover all your costs with the loan, meaning 100% financing!

Step 3: What Happens if Your Costs Are Over?

Sometimes, your costs may exceed the maximum loan amount. For instance:

• Purchase Price: $120,000
• Rehab: $40,000
• Closing Costs: $5,000
• Total Costs: $165,000

If your loan maxes out at $150,000, you’ll need to bring $15,000 of your own money to the table. This is why it’s crucial to carefully estimate your costs and compare them to your maximum loan.

Tips for Securing 100% Financing

• Plan Your Rehab Costs Wisely: Keep your rehab within a budget that fits under the loan amount.
• Negotiate Purchase Prices: The lower you negotiate the purchase price, the more room you have for other costs.
• Include Closing Costs: Some lenders allow you to roll closing costs into the loan, which can help with 100% financing.

Conclusion

Getting 100% financing for BRRRR properties is possible when you know your numbers and plan carefully. Focus on maximizing your ARV and keeping your costs within your lender’s loan limit. Contact us today if you have questions about fitting everything under your loan, tools like loan calculators can help you run the numbers before you commit. 

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