Questions about a Hard money lender HML for a rental property

[Brandon Clark]

Hey BP,

I have a home under contract that I will use as a rental. I would like to use the brrr technique, but I'm kind of confused about the refinancing part. The lender states that I can refinance after 6 months of seasoning. My question is; who can I refinance with after 6 months, what will my options be? Can I refi with any bank? Does it have to be with the HML?

I am waiting a phone call from the HML but a few other things that he mention.

-14% interest 

-6 month seasoning before refi

- 2-3 points

- I have to put 20k down ( points included here)

-Purchase price 68k

-Rehab price 3-5k

-ARV 115k-130k ( not many comps in the area)

I will be renting the property for $1400 a month 

Please let me know if you see anything wrong with this

Thanks

Brandon

[William Murrell]

The refinancing part is traditionally done with a bank. It does not have to be the HML and I wouldn't recommend that you do it with them. It's too expensive. Try to only use them to tie up deals that you otherwise can't finance. Think of the BRRR like this: buy a house for 100k. Let's assume for sake of argument and easy numbers that you have 100k note on it. You fix it up and it's now worth 150k. You then would get a note for 150k. That additional equity (the 50k) is now in your pocket and freed up for you to invest in the next deal. The hard money would only really enter this if you were trying to tie up the deal because you couldn't get that first 100k note.