BRRRR with hard money

[Myriam Joseph]

I am looking to use hard money with my first BRRRR in the upcoming months and I have questions regarding obtaining financing. Once you're able to secure a hard money loan, and want to "buy and hold" the property, if you refinance the property with a bank, must you use those proceeds towards repaying the hard money? Essentially, if I am not going to fix and flip it, but take out refinancing on the property, will paying back the hard money lender come out from the equity pulled from the refinance?

[Sean Blomquist]

@Myriam Joseph you are going in the right direction.  The hard money is used to acquire and rehab the property to build the equity into it.  When you do the refinance after the rehab is done, you are not doing a cash out refinance in most cases, just a rate and term refinance to pay off the hard money loan and keep your overall mortgage lower.  If you do want to pull some equity out of the property on that refinance, you would most likely have to wait for at least 6 months to do the refinance.  Doing the rate and term to leave the equity in the property, can be done as soon as the rehab is completed.  Check with your refinance lender to see their guidelines, but if they go based on Fannie Mae's without any overlays, that would be the case.

Good luck!