Help please! How i can get the funding for a house and rehab

[Bryan Rodas]

I want to know how I can get the money for the house and rehab?. I am studying the brrr method but i'm very unsure on how I can get the initial money for the house and the rehab? The differences between hard money and private money? Which one is better? Any tricks? Thank you

[Miller McSwain]

Typically with BRRRR, you are purchasing a property that is in bad shape. This makes financing a bit tricky because banks are typically opposed to lending on run-down properties. So you usually have to find an alternative. I'll list some options below:

1. Hard-money
This is the easiest to obtain but probably the most expensive. Hard-money is given by a lending business and charges high-interest rates. Hard-money can be great because they can lend for the purchase and rehab, but just know that you will pay a hefty price.

2. Private-money
Private money can be more difficult to come by but is typically cheaper than hard-money. Private money comes from an individual that is looking to invest some of their funds, typically because they want a higher return than the stock market can give them. Private investors are typically found in your network: family, friends, REIA groups, etc. You will typically develop a strong personal relationship with this person before using them as a lender.

3. Partner
Similar to private money, you can purchase deals with a partner. Typically in a partnership, you bring something valuable to the table and the partner brings something different. For example, you may be great at finding deals and managing rehabs, and your partner may have the cash available to purchase a deal and be great at finding/managing tenants. Since you both have skills/resources that the other person needs, you may decide to partner on a deal and split the profits.

4. Cash
If you have the means, you can purchase BRRRR deals with cash you have saved.

These are some of the methods you can explore. Keep in mind that while you can keep these forms of financing for the duration that you hold your BRRRR, you can also refinance (the 3rd R) into a conventional loan once the property is fixed up. As I mentioned, banks don't like to lend on distressed properties, but once the property is in good condition, they will likely give you a loan.