Wishful Thinking or Possible? HML question.

[James Amon]

Hi BP, I just have a question regarding using hard money lending.

So I'm hoping I could utilize HML for BRRRR, but my situation is that my wife and I don't have a huge cash on hand but we do have access to credit card up to $40k with credit scores of +770. Financially speaking, in income vs expenses, we can save only a couple of hundreds or less every month. I'm the only one who works at the moment but my wife can get a job and have an extra $2k/mo and I can take an extra shift/week that can get at least $1k if need be. My point on this is that we have plenty of cushion to carry loans.

My plan is to get a property under contract way below the ARV-repairs and have it financed by HML and either pay interest only monthly or preferably pay all of it at 6 or 12 months after rehab/rent/refinance. I'm willing and motivated to do the rehab myself. We're looking at <$150k of loan ARV on a 2-4plex house in Las Vegas. We don't have cash for downpayment but for the "skin in the game," is it enough to use our credit for the repair and our own sweat?

Is it possible to get funded with our situation? Is this within the realm of possibility or just wishful thinking? If it's not a possibility yet, what would you suggest I do to improve our situation?

Thanks!

[Jon Holdman]

This strategy can work.  But the key is to finding an acceptable property.  Doing the hard money, rehab, refi route is expensive, if you're trying to get all the cash you've put in out on the refi.  Your refi amount includes not only all the money you borrowed up front but also all the points, interest and other charges.  And then your rent has to cash flow with that new payment.  Finding a deal that lets you do this approach with none of your own cash into the deal once you refi is really, really tough.

Also watch out for running up those credit cards.  Credit card utilization (balance/credit limit) is a factor in your credit score.  Run your credit card utilization up and it will hurt your credit score, making refinancing more difficult and expensive.