If you want a quick way to help grow your real estate investment portfolio, the BRRRR method may be for you. Hard money lending in Houston can help you begin your BRRRR journey for commercial real estate. There are many benefits to choosing hard money over conventional loans or all-cash deals.
What is the BRRRR Method? How Does it Work with Commercial Real Estate Investment?
What’s the BRRRR method? This is a strategy for investing in rental property. The method can apply to any type of real estate, including commercial properties. BRRRR stands for Buy, Rehab, Rent, Refinance, and Repeat.
The idea is to purchase an undervalued property, renovate it to increase value, rent it out, refinance the loan with a cash-out, and use your equity in the property to repeat the process. This is a simple, yet often effective way of starting out with real estate investment or rapidly growing your portfolio.
Hard money lending in Houston can help provide funding to buy the initial property for your BRRRR strategy. However, it’s important to find properties that offer good profit margins. Most investors who use this method also follow the rule of 70%. This is where you don’t pay any more for a property than 70% of its after repair value (ARV) minus the cost of the rehab.
So, for example, if the ARV of a property is $110,000 and the property needs about $10,000 in repairs and renovations to reach that value, then you don’t want to pay any more than $70,000 for the property. This may help improve profitability for your investment.
Hard Money Lending in Houston Helps You Start Growing Your Portfolio
Why use hard money loans in Houston for the beginning of your BRRRR venture? There are several reasons why it might make sense for your situation.
First, using all cash for the property can tie up a large chunk of capital, which can hold you back from repeating the process for fast growth. Therefore, most investors choose to use loans for their investment.
Hard private money lending in Houston often offers higher loan to value rates than conventional loans. This means you need less initial investment for the down payment on the property. High loan to value is great if you’re just getting started and don’t have the capital to put 15 to 35% down.
Also, acquiring hard money is often much less difficult and complicated. These funding solutions can help you close quickly, often within just days. You can also generally purchase distressed properties that wouldn’t typically pass the inspection required by other lenders. In most cases, hard money lending in Houston generally requires just an appraisal of current value and ARV.
In addition, if you use a conventional loan to purchase commercial property for the BRRRR method, then you may have issues with refinancing. Most traditional lenders have a seasoning period for refinancing, usually between six months to a year. By contrast, hard money often doesn’t have a seasoning period, which means you can refinance as soon as your tenants sign the lease. This can help you with cash flow so you can quickly start purchasing more properties to expand your investment portfolio.
Hard Money Loans in Houston from Texas Funding Corporation
At Texas Funding Corporation, we’re experts in hard money lending in Houston. We’ve helped countless individuals and organizations since our founding in 1982. As a family operated private lender, we are here to help you with creative financing solutions for your investments. Call us today at 1-800-833-0138 to discuss your needs with our team and get funding!