Cash or hard money to buy a BRRRR property

[Kristi Wolfe]

I have heard (from a hard money lender, so he is motivated to encourage me to borrow hard money) that it's much easier to get the refinance at the end of a BRRRR deal if the property is finanaced for the purchase vs using cash to purchase and rehab a property. David Greene's BRRRR book and other things that I've read say cash works just fine, as long as you make sure to get your preapproval for the refi before entering into a deal to make sure your exit strategy is in place. Assuming I have the cash, and the plan is to get that cash right back out in a few months, I'd rather save the headache, closing costs, and interest rate associated with a hard money loan, but not if that means I cannot refinance.

Can anyone weigh in on this?

[Sean Blomquist]

@Kristi Wolfe you can use cash to do this, there are just a few things to be aware of with that:

1. you will have more of your own money tied up into the deal, because they can only refinance up to a certain %, so you will have a larger chunk invested vs the equity you would have in the deal by using a loan to do the deal.

2. typically you have to wait at least 6 months before you can do a cash out refinance vs a loan that can be refinanced as soon as the rehab is complete, since you aren't doing cash out.  You would be doing a rate and term refinance on the loan.

Yes, you would still have money tied up into the deal with the interest paid on the loan, but it should be significantly less than the amount of money left in the deal using cash outright.

Hope that clears it up a little more for you.