With inflation, typical rental property loans may not do the trick. Here are some new BRRRR lending options for you.
With rates so good over the last three to four years, all BRRRR investors were looking at one loan product – the 30-year fixed mortgage.
With rates increasing, however, you might need to look beyond the 30-year fixed loan to get into good BRRRR properties. Here are some options that can bridge your properties until rates go down.
ARMs (Adjustable-Rate Mortgages) for BRRRR
You can get three-, five-, or seven-year ARMs. Whichever time length you pick, the rates will be fixed during that period. Afterward, the rates become adjustable.
In rising markets, these loans aren’t that great. In declining markets, though, they can be the perfect loan to bridge you into a rental property.
You can get an ARM for .5-2% lower than a 30-year fixed mortgage. These lower rates can cash flow a property until either prices go up and you can sell, or rates go down and you can refinance.
Interest-Only Lending Options
With the interest-only BRRRR lending option, you don’t pay any principal for the first ten years.
An interest-only loan is appealing right now because it keeps cash flowing. Your loan amount doesn’t go down, so it’s not a great option for the long-term. But it is a good lending option to get you into a property during this next market.
40-Year AM (Adjustable Mortgage)
A 40-year AM spreads the loan payments over 40 years instead of the 30 with a traditional fixed mortgage. This adjustable mortgage gives you lower monthly payments… and more cash flow.
What To Keep In Mind with These New BRRRR Lending Options
ARMs give lower rates, 40-year AMs offer lower payments, and interest-only loans postpone the principle.
Keep in mind: these loans won’t help your equity or get a property paid down quickly. But they are good options to get into properties while values are low and funding is tight.
Remember that conditions of BRRRR are ever-changing. Get plugged into the money side of investing, and talk to lenders to see what’s available for you in inflationary times.
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