Brrrr Financing in Canada

[James Moore]

Hello everyone! New to BP and loving it so far!! I am looking at investing in Ontario Canada where I live. At this time I’m looking to come up with different ways to finance homes to BRRRR. A few questions if anyone has some answers! 1. If I’m getting private money to purchase a property, wouldn’t I be paying “cash” for the property and am able to have a very quick closing? 2. If I payed for it this way, after the house is fixed up, wouldn’t the bank see it as an asset which I own and not have any problem at all giving me a mortgage on it. Assuming it’s rented out and has/will have great cash flow? My concern is that I wouldn’t get approved for the mortgage that I would take out on the house to repay my private investors. Seeing as I purchased my own home at the top of the limit that my bank offered to me at the time. (Very little equity built up in my own home) What do you guys think?

[Jon Holdman]

The answer from @Roy N. assumes the private loan is secured by the property.  That is typically how its done.  But if you mean the private lender is just giving you a wad of cash up front, with no lien against the property you're buying, then you are correct.  It would be a cash transaction.  And when you did the re-fi it would be a cash out refi rather than a rate and term refi.  That can be more difficult.  Somehow lenders like it better if you're paying off a loan someone else already made than if they're the first one to lend against a property.

When you write a cash offer the seller will typically want a large earnest money deposit (e.g., 10%) and will want to see bank statements in the same name as on the offer showing the money (i.e., proof of funds.)