Line of Credit for Down Payment on First BRRRR

[Jessica Boulding]

Hi - I am a new investor that is trying to figure out the best approach to finance my first investment property (non-owner occupied) with little/no money . I have been doing research and thinking my best option is a hard money loan and doing the BRRRR method. My issue is getting the funds for the down payment. I have read people can use a personal line of credit to fund the down payment and then when they refinance they are able to pay off that debt. My concern with this strategy is the hit my credit score will take from a debt perspective and not finding a bank that will refinance. I currently have excellent credit and W-2 income. Has anyone been successful in doing this or has other suggestions?

Thanks in advance!

[Kristin Feerst]

I would save the cash for the down payment. It is less risky and you will want to have reserves. For my refi the bank wanted to see 6 months of reserves to cover the PITI on the unit even though I was getting $70k cash out!

Also, hard money loans usually reimburse for construction expenses so you will need cash up front to pay your contractor.

I just finished my first BRRRR, it was over budget and took longer than expected due to COVID, etc. But it is okay and we will make money. That said the only thing that saved us was having the cash to deal with the unexpected and keep the job moving.