Hard Money/Private Money

[Brandon Allenczy]

Hey BP!

I'm looking at scaling this year and my goal is to buy 6 more units (3 duplexes or equivalent).

I'd love to use the brrrr method to get these so I can minimize the cash I have tied up in the properties. That being said I've never used any type of short term financing before so I have a few questions I was hoping to get answers to.

1. Can you combine private and hard money? Say a hard money lender will give me an 80% LTV, if I borrow the 20% down payment from a friend, would that be considered illegal crowd funding or something? I feel like I've heard before if you borrow money from too many unaccredited investors you can get into some kind of trouble.

2. How do you show proof of funds when putting in an offer and using private or hard money? If I put in a cash offer and the seller wants to see proof of funds how would you handle that? Just get your lender's bank statement or something?

Thanks everyone!

[Riaz Gillani]

@Brandon Allenczy

Good plan - BRRRR's an awesome way to go.

(1) Borrowing money from a friend isn't illegal. But, it'll be based on the hard money lender. Some of the lower cost / slightly more doc lenders will source your assets to ensure they are wholly yours and NOT subject to repayment. For example, if a $30,000 deposit was shown in your bank statements (which are requested to verify liquidity), an LOE might be requested to confirm it's source. The answer generally cannot be a 'gift' or 'loan.'

(2) The lender can provide you with a proof of funds letter. It affirms the lender's intention to finance your purchase, but it is NOT a mortgage commitment. It simply states that preliminary diligence was done and the lender intends to finance your purchase. We distribute these upon a soft credit pull and bank statements that verify proof of a down payment, closing costs, and 4mo of ITIA payments. Again, though, this is coming from a lower cost + slightly more document HML.