Updated almost 9 years ago on . Most recent reply
Hard Money for BRRRR - downsides?
Hello BP. I'm in the process of structuring my first BRRRR and had a question about using hard money. Would HML's be typically willing to finance ONLY the rehab portion of the project (i.e., I buy the property for cash but use a HML just to rehab it)? If so, are there any major downsides to doing this? Would the following be examples of typical downsides to this strategy:
- rehab amount falls below minimum loan requirement
- not being able to refinance / use deferred refi since I'm using a loan for the rehab vs. cash
- ARV appraises less than expected, and hence presents a challenge in repaying the HML solely through a cash-out refi
- extended holding costs through being unable to refinance until the required seasoning time period ends (e.g., 6 months, 1 year)
Just trying to get an idea about what obstacles I should anticipate if using this strategy. Thanks you.