Creative Funding for HouseHack/BRRR

[Chelsea Ross]

Hello. I'm in the market for my first house hack deal. My mortgage broker doesn't offer the 203K loan or the HomeStyle loan (offered by Fannie). I'm looking for a creative way to get some immediate equity through forced appreciation. Does anyone have any recommendations for more creative/flexible mortgage lenders? Is it possible to flip something to myself? (ie buy it and renovate it under my LLC with hard money, then purchase with a 30 yr mortgage under my personal name and avoid the seasoning period) I have an excellent credit score but I don't want to leave much money tied up in the deal.

[Will Fraser]

Hi @Chelsea Ross, you're on an exciting path here and I'm hopeful you'll gain some insight here that has generational impacts on you!

In general the House Hack approach and BRRRR approaches are quite different beasts. For my personal clients here in Oklahoma City I recommend thinking of them quite differently by and large. A house hack uses a loan product that allows a buyer to bring little money to closing BECAUSE the buyer is going to live there.  A BRRRRR deal leaves little money in the deal because the difference in purchase price and the after repair value is so substantial.  Ideally you'd end up with around 25% equity in a deal, allowing you to have little money tied up in the deal.  

You can take a hybrid or very nuanced approach, but in a nutshell these are the foundations of the approaches. for this reason, to blend the models can be overly complicated AND inefficient. It is ALWAYS advisable to add value to a property, but to House Hack a property that DEPENDS on adding value for the deal to work usually ends up with more money in a property that it is worth. OR it ends up being the most stressful way to do a BRRRR -- having to live in it!

For my taste I want my house-hacks to be house-hacks and my BRRRRRs to be BRRRRRs and I NEVER want to HAVE to live in a 4-plex while I fixit up with Hard Money so that when I refinance it off of my FHA 3.5% down loan onto a 75% LTV conventional loan I hope I've added enough value to pay back all the debts AND have the equity. That's complicated, and a bit unicorny.