Loan structure
Value-add loans, when the plan is to keep it
A value-add loan finances a property whose income will rise once work is done: a renovation, a lease-up, a repositioning. The lender funds the purchase and some or all of the improvement budget, underwrites the plan and the stabilized value rather than today’s income, and expects to be repaid by a refinance into permanent debt once the property performs. It is the buy, renovate, rent, refinance structure investors describe as BRRRR, at any size from a single house to an apartment complex.
- 20,000+loan programs screened
- 5–8matches on a typical deal
- Zero upfrontto submit and compare offers
- 1 hourmedian first offer
Who is a value-add loan actually for?
Investors who intend to hold the property after the work is done, which is what separates this structure from a fix and flip. The business plan is the collateral: a scope of work, a budget, a timeline and a credible stabilized rent roll. Sponsors with prior projects get more room, but a first project with a clear plan and adequate liquidity is financeable, and the deal team’s job is to present it that way.
What do value-add lenders disagree about?
How much of the renovation budget they will fund and on what draw schedule, whether they size to cost or to the stabilized value, how they underwrite the exit refinance, what interest reserve they require, and how much sponsor experience they need to see. A lender that funds heavy renovation will not necessarily fund a light one, and the reverse is also true. Those differences are why the same plan should be quoted by several programs at once.
How does the exit work?
Once the property is leased and seasoned, it refinances into a permanent loan sized on its new income, which repays the value-add loan and, when the numbers work, returns some of the invested equity. The permanent lender’s tests decide whether that works, so the exit is underwritten from the start, not discovered at the end. When the plan is to sell instead, a fix and flip or bridge structure is usually the closer fit.
How does getting matched actually work?
You describe the deal once — about five minutes — and it is screened against 20,000+ loan programs. Most deals return 5–8 matches, and the median first offer arrives in under an hour. There is Zero upfront; the fee is 0.50–1.00%, paid only at closing.
YieldStack is a commercial mortgage brokerage, not a lender. The rate, the leverage and the credit decision belong to the lenders competing for your deal; our job is making sure the right ones see it at the same time, so the terms you compare are real competition rather than one desk’s appetite.
What do lenders actually look at?
Every program weighs these in its own way — which is the argument for several quoting at once.
- The scope of work, the budget and whether the timeline is realistic
- Sponsor experience with similar projects and liquidity to carry overruns
- The stabilized rent roll and what the property is worth once it performs
- The exit refinance, and whether a permanent lender will take it out
- Draw structure, interest reserve and how the work will be verified
Frequently Asked Questions
Is a value-add loan the same as a fix and flip loan?
They fund similar work but differ on the exit. A fix and flip repays through a sale; a value-add loan repays through a refinance once the property is stabilized and held. Lenders underwrite the two exits differently.
Will the lender fund the renovation budget?
Often some or all of it, released in draws as work is completed and inspected. How much, and on what schedule, is a program rule that differs from lender to lender.
What does BRRRR mean?
Buy, renovate, rent, refinance, repeat: an investor strategy where the refinance after stabilization returns equity to fund the next project. A value-add loan is the financing for the first three steps.
Does the exit refinance need to be arranged up front?
Not signed, but planned. Lenders want to see that a permanent loan will plausibly take them out at the stabilized numbers, and a marketplace submission can line up both structures from the same file.
Is YieldStack a lender?
No. YieldStack is a commercial mortgage brokerage, not a lender. Every term sheet comes from a lender in the network and is subject to that lender's underwriting.
Does it cost anything to see terms?
No. It costs Zero upfront to submit a deal and review offers; YieldStack's broker fee is 0.50–1.00% of the loan amount and is paid only at closing.
Is financing guaranteed?
No. Every credit decision is made by the lender; YieldStack arranges the introductions and negotiates on the borrower's side, and no loan, rate, or closing is guaranteed.
Where does YieldStack operate?
Nationwide. YieldStack arranges commercial real estate financing nationwide. Every deal is business-purpose commercial financing, and the broker fee is paid only at closing.
One deal.Several lenders.
YieldStack is a commercial mortgage brokerage, not a lender.