Why wouldn’t I just purchase with cash and refinance later?

[Gurjot Grewal]

Hey BP, im looking to do a BRRR. I have enough cash to purchase a fixer upper SFH in my market of choice. I could also use a personal line of credit to fund the rehab if needed.

The other option is a HML. They finance 70% of ARV and 100% of the rehab. But the fees and the monthly interest would add up quick if the rehab takes longer than expected.

This would be my first BRRR. At this point I'm not worried about scaling I just want to get in the game. It seems like cash would allow me to get a better purchase price, move slower with the rehab and give me more flexibility. Either way I would refinance the property after rehab.

Would love your opinions or advice. Thanks.

[Robin Simon]

It doesn't always make a lot of logical sense, but a lot of refinance lenders will actually penalize you if you are doing a full cash-out refinance once the renovation is done (if you own the property free and clear) and actually give you better terms if you are refinancing out of a rehab loan and not taking any cash out