Tag Archives: fix and flip loans

Beyond HARPTA: 5 Hawaii 2026 Investor Growth Drivers

July 15, 2026 Hard Money Lender Leave a comment

Beyond HARPTA: Hawaii Real Estate Investment 2026

Hawaii real estate investment 2026 comes with real opportunity, but only for buyers who understand the paperwork first. The islands reward patient, informed investors. They punish anyone who skips the fine print. This guide breaks down the tax rules, zoning shifts, and market trends shaping this year. Use it to plan smarter, not just faster.

Mastering the HARPTA and FIRPTA Tax Wall

Out-of-state sellers face a 7.25% state withholding under HARPTA. This applies to the full sales price, not just the profit. International sellers face an added 15% federal withholding under FIRPTA. Together, these can pull nearly a quarter of the sale price at closing.

The good news is this withholding is not your final tax bill. Most sellers get a refund once they file the right forms. A seller with no real gain can often recover most or all of the money. Work with a CPA early, before closing, to avoid cash flow surprises.

Building a Refund Roadmap

Start the paperwork weeks before your closing date, not days. Forms like N-288B can reduce or waive withholding if you qualify. Waiting until the last minute often means paying the full amount upfront. Then you wait months for your refund to arrive.

Investors using a 1031 exchange may also sidestep this withholding entirely. That single step often saves tens of thousands of dollars. A knowledgeable escrow team makes this process much smoother. Choose your closing partners carefully, not just cheaply.

The 2026 Short-Term Rental Pivot

Hawaii Island now requires all short-term rentals to register with the county. This rule, known as Ordinance 25-50, splits rentals into hosted and unhosted categories. Enforcement begins mid-2026, with fines reaching $10,000 for skipping registration. Owners who ignore this risk losing their rental income entirely.

Maui is taking a harder stance. The county is phasing out apartment-zoned vacation rentals over several years. Thousands of units will lose their rental status by the early 2030s. This is already pushing some condo prices down across the island.

Why Resort-Zoned Property Wins

Resort-zoned inventory sits outside these phase-out rules. These properties keep their rental rights under current zoning law. That stability matters more than ever to serious investors. A resort-zoned condo today carries far less regulatory risk.

Buyers chasing cheap apartment-zoned units may face a shrinking runway. Some of those rentals could lose legal status within a few years. Resort zoning offers a clearer, longer-term path to income. Always confirm zoning status before you sign anything.

Navigating the 19% Tax Environment

Hawaii’s Transient Accommodations Tax now sits at 11% statewide. Add the General Excise Tax, usually around 4%, and county surcharges follow. Combined, most vacation rental income faces an 18% to 19% effective tax rate. This is not a hidden fee. It is baked into every booking.

Investors who ignore this in their projections often overestimate returns. A property that looks profitable on paper can shrink fast after taxes. Smart buyers build these rates into every pro forma from day one. This keeps expectations honest and realistic.

Building Taxes Into Your Numbers

Run two versions of every deal: gross income and after-tax income. The gap between them is larger than most mainland investors expect. Commercial tourism assets, in particular, need this discipline. A missed tax line can turn a good deal into a mediocre one.

Local property managers and CPAs can help model this accurately. They see these numbers across dozens of properties each year. Their experience helps you avoid rookie mistakes. Do not rely on rental calculators built for other states.

The High-Value Tourism Surge

Visitor spending on Maui jumped 26.4% recently, even as room counts fell. Fewer rentals mean more competition for the ones that remain. Travelers are spending more per trip, not less. This shift favors quality over quantity.

Hotels and resort-zoned rentals are capturing this higher spending. Multi-bedroom luxury units are outperforming standard hotel rooms. Families and groups want more space and more privacy. That demand is not slowing down anytime soon.

What This Means for Construction and Rehab

Developers should consider larger, multi-bedroom resort-zoned units. These properties command stronger nightly rates in the current market. Renovation projects should lean into this trend, not fight it. Add bedrooms and living space where zoning allows.

Traditional small hotel rooms may struggle to keep pace. Investors chasing rehab projects should study recent luxury bookings closely. The data points toward bigger, better-appointed inventory. This is where the growth is happening right now.

Strategic Use of 1031 Exchanges

A 1031 exchange lets investors defer capital gains taxes on a sale. The proceeds simply roll into another qualifying property. This tool is especially useful in Hawaii’s high-value market. It keeps more capital working instead of sitting with the tax office.

Hawaii lawmakers debated raising the state capital gains rate from 7.25% to 9% this year. That specific proposal did not pass during the 2026 session. Still, the discussion signals where state tax policy might head next. Investors should watch this closely each legislative session.

Positioning Yourself as a Partner

Explaining 1031 exchanges clearly builds real trust with clients. Many out-of-state buyers have never used one before. Walking them through the timeline and rules adds genuine value. This is not a sales pitch. It is real guidance.

Pair this with HARPTA exemption planning for maximum impact. Together, these strategies can preserve significant capital at closing. Investors remember advisors who save them real money. That reputation compounds over time.

The Kauai Resort-Only Opportunity

Kauai has maintained a moratorium on new residential vacation rental permits since 2008. This means the supply of legal vacation units is essentially frozen. New investors cannot simply convert a residential property into a rental. That door has been closed for years.

This scarcity makes existing resort-zoned commercial assets more valuable. Supply cannot expand to meet rising demand. Anyone holding legal, resort-zoned inventory holds a real advantage. That advantage should only grow through 2026 and beyond.

Reading the Supply Constraint Correctly

Investors should not assume Kauai works like other islands. The rules here are stricter and older. This makes due diligence even more critical before purchase. Confirm any existing permit is valid and properly transferred.

Resort-zoned properties on Kauai carry a built-in scarcity premium. That premium reflects real, lasting regulatory limits. Buyers who understand this pay accordingly and hold with confidence. Those who skip this research often overpay or underprepare.

Turning Complexity Into Confidence

Hawaii’s market rewards investors who do their homework. HARPTA withholding, shifting STR rules, and combined tax rates all matter. Ignoring them does not make them disappear. It just makes the surprises bigger later.

The investors who succeed here treat these rules as a roadmap, not a roadblock. Zoning status, tax planning, and exchange strategy all work together. Getting this right takes patience and the right guidance. That is exactly where a knowledgeable local partner earns their place.

How Rehab Lend LLC Fuels Investors Nationwide

At Rehab Lend LLC, we know Hawaii’s tax rules and zoning shifts make financing speed essential. As trusted Hawaii hard money lenders fix and flip loans, we close deals quickly, even on complex island properties. Our Hawaii apartment DSCR loans qualify borrowers on rental income, not personal pay stubs or tax returns. We also fund fix and flip loan lenders nationwide designed around short timelines and real renovation costs. As experienced hard money rehab loan lenders, we structure draws around actual construction progress, not guesswork.

Delaware Commercial Real Estate Investment Strategy

Investing

The Delaware Edge: 2026’s New Laws for High-Yield Investing

July 15, 2026 Hard Money Lender Leave a comment

The Delaware Edge: Delaware Commercial Real Estate Investment Strategy

A solid Delaware commercial real estate investment strategy starts with understanding why the state now leads the region in transaction growth. Investors who once viewed Delaware as a quiet, secondary market are rethinking that view fast. The numbers from early 2026 tell a clear story. Smart money is moving in, and it’s moving in with purpose.

The 414% Surge: Analyzing Delaware’s 2026 Market Momentum

Delaware’s commercial real estate market posted a 414% jump in sales volume for high-value properties in the first part of 2026. That kind of growth doesn’t happen by accident. It reflects a wave of investor confidence built on stable fundamentals and clear regulatory footing.

Median cap rates are holding around 6.75% across the state. That figure matters because it signals income stability rather than speculative pricing. Compared to more volatile primary markets, Delaware offers something rare right now: predictable returns without the wild swings. For investors tired of chasing appreciation in overheated cities, this steadiness is a welcome change.

Why Stability Matters More Than Ever

Bigger markets often promise higher upside, but they also carry higher risk. Delaware’s smaller size and consistent policy environment reduce that uncertainty. Investors get income-driven performance instead of guesswork. That trade-off is increasingly attractive to portfolios built for the long haul.

The New ABC Act: A Modern Edge for Asset Management

Delaware’s updated Assignment for the Benefit of Creditors law, often called the New ABC Act, changed the game in 2026. This modernized framework gives investors a faster, more private path for handling distressed assets. It works as an alternative to federal bankruptcy proceedings, which can be slow and public.

For anyone acquiring or managing struggling properties, this matters a lot. The process moves quickly, stays out of the courtroom spotlight, and keeps costs lower than traditional bankruptcy routes. As an advisor, I see this as one of Delaware’s most underappreciated legal advantages. It gives sophisticated investors a tool that few other states can match.

A Practical Tool for Distressed Deals

Speed and privacy aren’t just conveniences. They’re competitive advantages. Investors who can move faster on distressed assets often secure better pricing and terms. That’s where Rehab Lend LLC comes in. As a trusted hard money lender in Delaware, we help investors act fast when timing matters most. Delaware hard money loans from Rehab Lend LLC are built for speed, flexibility, and real opportunity. Whether you’re acquiring a distressed asset or moving on a time-sensitive deal, our team makes the process simple. Delaware’s legal structure makes that kind of agility possible, and we make sure you have the capital to match it.

The Tax “Decoupling” Shift: Navigating HB 255

Delaware made a notable move in 2026 by decoupling from federal bonus depreciation rules. While the federal government restored 100% bonus depreciation, Delaware chose a different path. Under HB 255, the state does not conform to that federal treatment.

This shift changes how large-scale portfolios should approach state-level tax planning. Investors can no longer assume federal and state depreciation schedules will match. A more nuanced strategy is now required, especially for those with significant asset bases in the state. Working with a knowledgeable advisor on this point isn’t optional anymore. It’s essential.

What This Means for Portfolio Planning

Decoupling creates a gap between federal savings and state tax liability. That gap needs careful modeling before any large acquisition closes. Getting ahead of this now can prevent costly surprises down the road.

For investors looking beyond short-term financing, Rehab Lend LLC also offers Delaware DSCR loans lenders designed for long-term rental strategies. These loans are qualified based on property income rather than personal tax returns, which makes them ideal for growing portfolios. DSCR financing works especially well for multifamily buildings, single-family rentals, and mixed-use retail spaces along growth corridors like Route 24. They’re also a smart fit for investors navigating Delaware’s tax decoupling under HB 255, since income-based qualification can simplify planning when depreciation rules differ at the state level. Landlords holding multiple properties, or those expanding into Sussex County’s rental market, often find DSCR loans easier to scale than traditional financing. With Rehab Lend LLC, you get a financing partner who understands both the numbers and the local landscape.

Coastal Expansion: The Sussex County Growth Corridor

Sussex County is no longer just a summer destination. The Route 24 corridor, running through towns like Millsboro, is transforming into a year-round commercial hub. Retail and multifamily developers are taking notice, and for good reason.

Population growth along this corridor has been steady and strong. Combined with Delaware’s lack of state sales tax, the area offers a compelling mix of demand and cost efficiency. What used to be seasonal foot traffic is turning into consistent, year-round consumer activity. That shift supports stronger, more reliable returns for commercial property owners.

From Seasonal Town to Commercial Hub

This transformation didn’t happen overnight, but it’s accelerating now. Infrastructure investment and population inflows are feeding each other. Investors who get in early on this corridor are positioning themselves ahead of the broader market.

The DST Advantage for International Portfolios

Delaware Statutory Trusts are projected to reach 11 billion dollars in equity by the end of 2026. That growth reflects rising interest from both domestic and international investors. DSTs offer a way to own fractional shares of institutional-grade real estate without the headaches of direct management.

For international investors specifically, DSTs come with added benefits. They help manage FIRPTA withholding requirements more efficiently than direct ownership structures. This makes them a smart entry point into U.S. commercial real estate for foreign capital. The structure simplifies compliance while still delivering exposure to high-quality assets.

Fractional Ownership, Institutional Quality

Not every investor wants the burden of full property management. DSTs solve that problem while keeping asset quality high. It’s a structure built for passive income with active-level returns.

2026 Entity Maintenance and Licensing Updates

Delaware also updated its fee structures and licensing rules for 2026. LLCs now face an annual fee of 400 dollars, a change every property owner should factor into their budgeting. This isn’t a dramatic increase, but it does require attention.

New licensing requirements for wholesaling activity have also taken effect. Investors involved in that side of the business need to stay current on these rules. Compliance isn’t just about avoiding penalties. It’s part of protecting the long-term value of your investment structure. Staying ahead of these updates is part of being a responsible steward of your own portfolio.

Staying Compliant Without the Headache

Rule changes can feel tedious, but ignoring them carries real risk. A proactive approach to entity maintenance protects your business from unnecessary exposure. Treat these updates as routine maintenance, not an afterthought.

Positioning for What Comes Next

Delaware’s 2026 momentum isn’t a fluke. It’s the product of deliberate legal modernization, tax policy shifts, and genuine regional growth. Investors who understand these moving parts are better equipped to act with confidence.

The state’s combination of predictable cap rates, modernized creditor law, and expanding coastal markets creates a rare kind of stability. Add in the growing role of DSTs for international capital, and Delaware starts to look less like a hidden gem and more like a mainstream strategic destination. For investors focused on risk-adjusted returns, the case for Delaware has never been stronger.

Anyone building or adjusting a portfolio in 2026 should take a hard look at what’s happening in this market. The data, the legal framework, and the growth corridors all point in the same direction. Delaware isn’t just a tax-friendly option anymore. It’s becoming a genuine strategic haven for commercial capital.

Beyond Delaware: Rehab Lend LLC’s Nationwide Reach

We don’t stop at Delaware. As one of the leading nationwide direct hard money lenders, we help investors move quickly on properties across the Lone Star State. Our fix and flip loans are built for speed, giving rehabbers the capital they need without the wait of traditional banks. We’re also known as reliable hard money rehab loan lenders contact us today.

fix and flip lenders

Fix and Flip Trends 2023

March 15, 2023 Hard Money Lender Leave a comment

Fix and Flip Trends 2023

2021 and 2022 were particularly great years for flipping houses but have the tables turned? We’re facing higher interest rates, inflation, and a possible recession, making things look a little bit grimmer in 2023. However, there are still plenty of opportunities for fix and flip investors in the year ahead. Here’s what the experts want you to know.

2023 may see tighter profit margins for fix and flip investors
Unfortunately, a number of factors could lead to smaller profit margins in 2023. This includes:

Increased cost of construction materials. Over the past few years, we saw a huge increase in the cost of construction materials. Though these have started to decline – particularly the costs of lumber – prices remain elevated, adding to the costs involved in renovation and rehab projects.
Lower inventory and higher prices. Increasing mortgage rates and higher house prices mean people are reluctant to sell, and therefore there are less opportunities to purchase fixer upper properties. It also means it is harder to find properties with the potential to net a decent profit.

Despite this not-so-sunny outlook, with careful planning, the right purchase and a cost-effective fix and flip loan, you can still see yourself making a profit from flipping property this year. Choosing the right loan and planning ahead can maximize your investment and ensure flipping property is worth your while.

Foreclosure levels will continue rise
According to ATTOM, foreclosure filings increased 64% by the end of 2022, with the States of Texas, California and Florida hit the hardest. With a recession on the horizon, unemployment will likely increase and therefore foreclosure rates will continue to rise. For fix and flippers, this could lead to more inventory to choose from. However, investing in foreclosed properties is complex and only recommended for seasoned investors with a strong understanding of the process.

Rental prices will continue to increase
With rising house prices and increasing mortgage rates, many prospective homebuyers are choosing to rent instead. This has resulted in increasing rental prices, which are predicted to carry on rising. This means 2023 could be a great time to employ the BRRRR method. BRRRR (Buy, Rehab, Rent, Refinance, Repeat) involves purchasing and rehabilitating a distressed property, then renting it out and refinancing to start the process again with another property. With increased rental prices, this method may see a huge influx of passive income and the ability to carry on investing without a huge outlay of capital.

Technology will continue to open doors for fix and flip investors.
There are many ways technology is making it easier for fix and flip investors to find opportunities for a successful investment. For example, technology means you can view and inspect properties online, allowing you to search for deals across the country without ever leaving your home. Technology also means the process is much faster with reduced paperwork and processing times, allowing you to snap up a deal quickly.

So how can you make the most of fix and flipping in 2023?

Do your research. Markets vary widely across the country, as do the costs involved in flipping a home. Make sure you do your research, shop around and have a solid understanding of the market you’re investing in – and the costs you’ll incur along the way.
Choose the right lender. Not all fix-and-flip lenders are the same and it’s important to partner with someone who understands your goals and can work with you to achieve them.

If you’re ready to make a move in the fix and flip investment market, get in touch with RehabLend today. We can help with a cost-effective rehab loan tailored to your strategy and designed to optimize your investment.
This article is intended as a general guide and should not be considered as advice.

fix and flip lenders

Best Fix and Flip Lenders

November 21, 2022 Hard Money Lender Leave a comment

How to Choose the Best Fix and Flip Lenders

If you’re looking for a short-term loan for flipping houses, whether it’s a multifamily rehab loan, an apartment rehab loan or a rehab loan for an investment property, choosing the best direct hard money lender is crucial. There’s no shortage of hard money lenders for fix and flip projects, however, you want to choose one that offers the best terms for your unique needs, while also genuinely caring about your project and its success.

So, what do you need to look for in a hard money fix and flip lender and what questions should you ask to ensure you’re securing the best fix and flip lenders terms?

RATES AND FEES

One of the most obvious things to look for when choosing a hard money lender for fix and flip investments is what their rates are. Generally, the rates of a hard money fix and flip loan will be higher than traditional mortgages from conventional financial institutions like banks, however, if you shop around you’ll be able to find attractive options.

Don’t forget to ask what fees you’ll incur. Most lenders charge fees at various stages of the loan and these need to be factored into your budgeting.

REPAYMENT TERMS

Another thing to consider when looking for the best fix and flip lenders are their repayment terms. For instance:

Do they offer interest and principal repayments, or interest-only?
Will the lender allow you to pay off the loan early without incurring a penalty?
What are your options if the rehab takes longer than expected?

Also, consider if the fix and flip hard money lender’s terms are constant. You have enough to worry about without dealing with a lender whose terms change with the economy.

APPLICATION PROCESS

Unlike traditional financial institutions like banks, hard money lenders generally have easier and faster application processes that require a lot less paperwork. Many even allow you to complete your application process online. Ask your potential hard money lender for flipping houses how their application process works and see how it compares to other lenders.

Also, consider what is required to apply and qualify before you settle on a lender. Most fix and flip lenders focus on the property you intend to use as collateral or the deal you’re proposing, however, others may want to see your credit score, tax returns, and other assets.

CLOSING TIMES

Generally, the major drawcard for hard money rehab loans is how fast they can be closed. Be sure to ask a prospective hard money fix and flip lender how quickly they close their loans.

Some commercial rehab lenders offer extremely short closing times – some in as little as days. However, you need to be aware that this is dependent on you getting your documents in quickly and responding quickly if any additional information is required.

Additionally, not all lenders with short closing times offer this in their fix and flip loans for beginners, so don’t get swayed by short closing times before checking the fine print.

DOWN PAYMENT

Some fix and flip hard money lenders require a down payment of up to 20%, however, others offer hard money rehab loans with a 0% down payment. Again, this can depend on your experience and circumstances, so be sure to check what applies to you.

WHAT THE LOAN ACTUALLY COVERS

Some hard money lenders for flipping houses offer financing for the purchase price as well as the renovation or rehab costs. If financing the rehab of your investment is something you require, be sure to check that this is covered.

EXPERIENCE

Choosing a lender with vast experience can make all the difference. Additionally, if you’re working with a lender who has been around a long time, chances are they’ve weathered several recessions and will be able to help you through tough times in the future too.

Questions you could ask to determine just how experienced the fix and flip hard money lender is could include:

How many hard money rehab loans have you issued?
Do you have experience fixing and flipping properties yourselves, or do you deal with finance only?
How do you underwrite your loans?

VERSATILITY

If you’re planning on flipping projects in the long-term, consider partnering with a fix and flip lender who offers the versatility to work across multiple projects. This includes the ability to fund varying sums of money, as well as the ability to fund the purchase and renovation of various property types such as multifamily, mixed-use and commercial properties. Additionally, not all fix and flip lenders can offer investment property rehab loans in every State. If you’re planning to invest in a different state to the location of a hard money rehab lender, or intend to invest in multiple states, it’s worth asking what areas the lender in question can serve. Working with one lender on multiple projects, as opposed to sourcing different lenders in different regions, is a good way to build a long-term relationship that will ensure better rates, terms, and availability of financing.

The last thing to consider is what your priorities are. Is it a fast-closing commercial rehab loan or the cheapest possible rates? Are you looking to build a long-term relationship with a lender, or just want someone who can help you with a one-off investment opportunity?

Whatever you’re looking for, Rehablend is one of the best fix and flip lenders in the country. We genuinely care about the success of your project and offer flexible bridge loans that can be tailored to your needs to ensure optimum ROI. To find out more or to see if our short-term loans for flipping houses are right for you, get in touch today.

Blog

The BRRRR Method

May 22, 2022 Hard Money Lender Leave a comment

How to Achieve Financial Success with the BRRRR Method

If you’re in the property investment game or looking to get in, you’ve more than likely heard the acronym BRRRR. Short for “Buy, Rehab, Rent, Refinance, Repeat” this is a real estate investment strategy that, when done correctly, can have extremely lucrative results. So what exactly is this strategy, what are the pros and cons and how can a hard money investor help you achieve BRRRR success?

What Is the BRRRR Investment Strategy?

Essentially, BRRRR is a strategy that involves buying a distressed property with the intention of fixing it up, refinancing and using the equity to purchase another distressed property and starting the process again. It’s made up of five key steps:

Buy
Rehab
Rent
Refinance
Repeat

It is absolutely crucial to do each of the steps in order to achieve success.

Whilst this process is more demanding than purchasing a property that is ready to rent out immediately, it is a much more rewarding process. As long as you are willing to put in the hard work, have an eye for the market and don’t mind the stress and cost involved in a rehab project, this method is an excellent way to build your passive income portfolio. With the help of a private fix and flip lender, you’ll grow your wealth with very little capital required upfront.

The BRRRR Steps Explained

To take a closer look at the five steps of the BRRRR method, these are:

B – Buy a Property

The very first step of the BRRRR method is to purchase a property. The goal here is to purchase a distressed property at a price well below market value. It’s important to choose a property that you can add value to through renovations and repair work.

The buy phase requires extensive deal analysis. You’ll need to calculate the costs of the renovations, estimate monthly expenses and rental potential and ensure there is a large enough profit margin once all outgoings are covered. Generally, it’s recommended that you follow the 70% rule. Namely, don’t invest more than 70% of the after-repair value (ARV) of the property.

Tip: Be prepared to walk away if the final asking price is too high. Paying too much can reduce your potential profit and will also mean you’ll have to wait longer to utilize your cash-out refinancing to make your next purchase.

R – Rehab the Property

This step involves repairing, upgrading or renovating the property to make structural, safety and cosmetic improvements that bring the property up to code and increase both its value and its appeal to potential renters.

Rehabbing your distressed property will be a balancing act of increasing value to attract a higher rental income and greater equity without overspending on repairs and renovations. Therefore it’s important to focus on making improvements that will truly increase the value of your property and its rental potential. Don’t get sucked in by fancy add-ons and upgrades that are unlikely to increase your rental income. Ultimately, you should ask yourself two key questions:

What needs to be done to make the house livable?
What rehab, repairs or renovations will add more value than they cost?

Upgrades and renovations that can add a lot of value and therefore offer a high ROI include:

Roof and drywall repair work. Appraisers often take repair work into account, such as fixing or replacing the roof and fixing damage such as drywall damage. Roof and drywall damage also decreases the value of a property, which means you’ll be able to buy the property cheaply.
Updated kitchens. Purchasing a house with a kitchen that has been demoed or is unusable, means a much cheaper sale price, since it will not be eligible for traditional financing. Updating a kitchen can often be done affordably and will greatly increase your property’s appeal to renters.
Updated bathrooms. A brand-new bathroom will also make your property highly competitive on the rental market.
Adding bedrooms. If the house you are purchasing has enough floor space to add additional bedrooms without needing to extend, this will allow you to add significant value for very little cost.
Landscaping. Even just simple landscaping can greatly increase the appeal of a property and therefore offers a high ROI.

Tip: Be realistic with your timeframe and budget, and be prepared to conduct a detailed and in-depth cost-benefit analysis, not just when you begin but throughout the project as well.

R – Rent Out the Property

As soon as the rehab work is complete and the property is in good enough condition, rent it out. This step must be achieved before refinancing as often lenders won’t refinance an investment property until it has tenants.

Determine your rental rate by comparing it to other properties in the area and keep in mind a price that is both fair to tenants and accommodating of the property’s outgoings.

Tip: to choose a good tenant, look for someone with a good rental history and a record of making rental repayments on time, a steady job, good credit history, no criminal history or a history of eviction and good references.

R – Refinance

Once you have tenants in place, the next step is to refinance the property. You want to choose a loan with a cash-out facility in order to turn your equity into cash to fund your next purchase. Bear in mind that not all lenders offer a cash-out facility so be sure to check this before deciding on your lender.

Tip: Some lenders also require you to own the property for a certain length of time before allowing for cash-out, so this is something else to check when signing up for your loan.

R – Repeat

Using the cash from your cash-out refinance, you can purchase another property and start the process again. Take the experience and knowledge you’ve gained along the way, learning from your past mistakes to achieve even greater success. The more you do this, the easier it will become. You’ll start having systems in place and contacts that make everything easier, more streamlined and even more cost-effective.

Tip: Be sure to complete each step in the right order, no matter how many repeats you’re up to.

The Pros of the BRRRR Investment Strategy

When pulled off successfully, the BRRRR method can offer a multitude of benefits. For instance:

Building up equity which will result in the ability to purchase rental properties on a revolving basis. You’ll end up with a huge property portfolio with minimal capital outlay. Generally, you’ll only need enough money for a down payment and potential closing costs
Recovery of your initial capital outlay. Because you’ll be refinancing based on the after-repair value means you may also be able to recoup your initial investment once you’ve refinanced.
Ongoing passive income. Owning a large portfolio of long-term investment properties means you’ll receive additional income without ongoing involvement
Attracting high-quality tenants. A property that has been renovated to meet higher standards is more likely to attract good tenants. These tenants will be happy to pay higher rent and will take care of the property, positively impacting your cash flow

The Cons of the BRRRR Investment Strategy

Of course there are also downsides and risks to be aware of. Some things to consider include:

The cost and work involved in rehabbing a property can be high. Many investors underestimate things such as repair costs, which can affect the outcome of a project. Additionally, managing contractors and subcontractors and dealing with problems that arise can be extremely time-consuming and stressful
The process can take a long time, which means it requires a lot of patience and forward-planning. Rehabbing the property can take several months and can often run overtime. Likewise, it may also take longer than expected to be able to access the cash out function of your loan.
It can also sometimes take a while to find good tenants, especially if you’ve purchased in a competitive area. Accordingly, you need to make sure you’re able to cover mortgage repayments when the property is unoccupied
Financing can be expensive. Hard money flip funding can incur high rates and fees, and often BRRRR investors find themselves overleveraged, especially during the rehab phase
The risk of overestimating your ARV or underestimating the costs of the project can have a significant impact on the equity in the property. If you misjudge these things, you may have to wait until the home’s value increases before you can access cash-out refinancing

How A Hard Money Rehab Lender Can Help You Achieve Success with the BRRRR Investment Strategy

The roadblock to investing in the BRRRR method for many investors is funding. Because you’re borrowing money to flip a house, it can be difficult to get a traditional mortgage. This is typically due to the fact that traditional lenders such as banks require an appraisal of the property but it’s difficult to determine the value of a distressed property. Additionally, a distressed property is unlikely to meet the specific guidelines needed to secure a traditional mortgage.

Fortunately, there are other viable options, including hard money lenders for flipping houses. A private hard money lender can finance a distressed property with tailored fix and flip loans. Whilst hard money financing usually involves high-interest rates, these loans are generally short-term allowing you to fund the purchase and renovation and then later refinance with a more cost-effective loan.

Additionally, a hard money lender can lend you up to 90% of the purchase price and 100% of your construction costs, meaning even less upfront capital outlay.

Other Tips for Getting Started

Before you begin, it’s a good idea to reduce your personal debt and make sure your personal finances are in shape. This can help ensure you have the capital you need for your first purchase and the costs involved in rehabbing the property
Be sure to develop a really good understanding of the markets, so that you know the best places to invest and market values so that you’ll recognize a good opportunity when you see one

If you are ready to begin building your passive income portfolio, Rehablend can help you with cost-effective commercial rehab loans tailored to suit your needs. Contact us today and one of our senior loan officers will be in touch to answer your questions and get you started.