BRRRR - Hard Money to a conventional loan

[Ben Manna]

Hi all,

First-time poster, here. I am new to the real estate world after buying my first property with my older brother earlier this year. It is a duplex that we bought via an FHA loan since my brother is living in one unit and we are renting the other unit out. We didn't have much money for a down payment so an FHA loan really helped us get our first property under our belt. The place was a bit of a fixer-upper (more specifically the upstairs unit) which was fine since my brother would be living in that unit and it gave us the time to give it the TLC it needed. We replaced the carpets (the previous tenant had lived there for years with cats - the place stunk of cat pee), painted everything from the ceiling to the baseboards, new laminate floors in the kitchen and hallways, and new light fixtures throughout the unit as well as a new toilet.

After going through that rehab ourselves it got us thinking about pursuing a real BRRR method for our next property. Finding something that needs some serious love, perhaps more than just flooring and paint, a legit distressed property or foreclosure, and doing a full rehab to either flip or hold and rent out with some built-in sweat equity. However, again we don't have much money to put down for our next place so are considering a few options that I was hoping I could get some advice on from this forum.

1.) Pool together the money we both have saved up (we would likely do this in another 12 months) and combine that with a cashout refi or home equity loan from our first rental (if we have enough equity built up in the property from the work we put into my brother's unit earlier this year) to come up with the down payment and rehab costs.

2.) Look into a hard money lender to finance the purchase and rehab of our next property - This is really what made me write this post and where I have the most questions.

1. a.) Do hard money lenders finance both the full purchase price plus rehab costs? If so do any of them do it for no money down? If not what kind of down payment are we looking at?
2. b.) Let's say we are able to secure hard money financing with no money down - wouldn't we still need to come up with 20% of the ARV in order to secure a conventional loan and pay off the original hard money loan? - this is perhaps the biggest question that I would like help with. Basically, how do you turn around and acquire another loan to get you out of the hard money debt with the big interest payments each month?
3. c.) After the hard money loan would we be able to use an FHA loan to pay off the hard money or is conventional the only way here?

Thanks in advance and look forward to hearing from you guys. Happy Holidays!