Funding Process Questions

[Teonia Riley]

Hi everyone! Just looking for clarification on this concept.

If I were to use the First time homebuyer program to help with purchasing purposes and then get a hard money lender for renovations to attempt BRRRR strategy, would this be something that could work or NO, dont try it?

(Yes I'm aware you have to live in the property for 5+years if doing the FTHB)

[Robert Collins]

Hi Teonia!

Your idea of combining the First-Time Homebuyer program with a hard money lender for renovations to attempt the BRRRR strategy is an interesting concept. Let's break it down to assess its feasibility.

1. First-Time Homebuyer Program: The FTHB program offers benefits such as down payment assistance, reduced interest rates, or other incentives to help individuals purchase their first home. While these programs typically require you to live in the property for a certain period, usually 5+ years as you mentioned, it's crucial to review the specific requirements of the program you're considering.
2. Hard Money Lender and the BRRRR Strategy: The BRRRR strategy involves purchasing a property, renovating it, renting it out, refinancing to recover your investment, and repeating the process. Hard money lenders can provide short-term loans for property renovations. However, they often come with higher interest rates and fees compared to traditional financing options.

Now, let's assess the combination of these two approaches:

Pros:

• First-time homebuyer benefits: Utilizing the FTHB program can provide financial assistance and make homeownership more accessible.
• Potential for value-add: By using a hard money lender for renovations, you have the opportunity to add value to the property and potentially increase its market value.

Cons/Considerations:

• Living in the property: If you intend to take advantage of the FTHB program, you'll need to reside in the property for the required time frame, typically 5+ years. This might limit your ability to implement the BRRRR strategy immediately.
• Financing challenges: Hard money loans are generally short-term and have higher interest rates and fees. Refinancing after the renovations to recover your investment might be more challenging due to the property being your primary residence, potential appraisals, and loan-to-value ratio requirements.

It's important to consult with professionals, such as a knowledgeable lender, real estate agent, or attorney, who can provide guidance based on your specific circumstances and the local regulations. They can help you navigate the FTHB program requirements, assess financing options for renovations, and develop a viable strategy.

Overall, while combining the FTHB program with a hard money lender for renovations can be an intriguing approach, it's essential to thoroughly understand the implications, restrictions, and potential challenges involved. Conduct thorough research and seek professional advice to ensure you make an informed decision that aligns with your goals and financial situation.

Best of luck with your real estate endeavors!