Usually they are cash purchases, but you can use private or hard money to lend on the cash buy plus the rehab costs.
You will still need your own cash to pay the down payment, closing costs, insurance and to front the construction costs before draws. The construction loan is a reimbursement loan.
BRRRR is cash intensive and make sure you have contingency and a back up plan so you don't lose the property if construction costs go way over budget.
I just started my first BRRRR and have a decent amount of cash saved, but I am still anxious because its a lot of capital to front.
I wouldn't get into it without cash to cover the down payment + closing costs + 1/2 rehab costs + holding costs + 15% contingency
Usually they are cash purchases, but you can use private or hard money to lend on the cash buy plus the rehab costs.
You will still need your own cash to pay the down payment, closing costs, insurance and to front the construction costs before draws. The construction loan is a reimbursement loan.
BRRRR is cash intensive and make sure you have contingency and a back up plan so you don't lose the property if construction costs go way over budget.
I just started my first BRRRR and have a decent amount of cash saved, but I am still anxious because its a lot of capital to front.
I wouldn't get into it without cash to cover the down payment + closing costs + 1/2 rehab costs + holding costs + 15% contingency
@NIcholas Hamel You can start out as a fix n flip loan which usually requires 10% downpayment, and then when rehab complete you can refinance into long term rental loan up to 75-80% of new appraised value. Most banks/lenders will require an ownership seasoning period from 90 day to 6 months or longer. You will be paying high rate during the fix n flip loan and you have 2 sets of closing costs for the 2 loans.
Great advice @Kristen Feerst - Im just getting started with BRRRR as well and think you have the right formula - ideally one would have cash for everything plus a contingency, but if its not all there, I agree with the minimums you laid out.
In Dan’s example you closed on a fix n flip loan to purchase the property and then you refinanced into long term financing for the rental and you will have a second closing.