Is it a good idea to use a Hard Money Loan to BRRRR?

[Demarco Brown]

Is it a good idea to use a hard money loan to invest in a long term real estate property using the BRRRR method if i have little capitol?

[Nate Sanow]

Hey Demarco , I do think HML is perfectly fine. Find some apps or online calculators and compare your monthly payment on a traditional lender at let's say 5.5% - with full PITI included - and then compare it to interest only at let's say 12%. Now, multiple the difference by 5.

If you have a typical project you will easily take 5 months to exit. If you’re a rockstar and manage well you might be able to do it in 3 but let’s stick with 5… the difference is going to approximately be a few thousand dollars… 

here’s what I’m getting at. Using hard money is higher interest. It’s a cost to calculate. Just like factoring in HVAC or roof. 

However, without it, you are likely facing the worst expense of them all: opportunity cost.