Where to start on financing options for BRRRR ?

Question

Hello Everyone,

So I have started looking into potential BRRRR deals in my area, and ran numbers on a few.  I'm starting to get to a point where I find one that looks to be a good investment, so if I was 100% ready, my next step would be to take my GC over there and estimate the rehab cost.

The main part that is holding me back is my lack of knowledge with the Financing part.

Where would be a place to start for me seeing that this would be my first investment deal?  My wife and I own our current house, and it's actually in just her name.  Will that play into my favor when getting financing for this deal, or do I need to get my name added on the mortgage?  I guess I'm a bit confused between the different financing options I would have available.  I'd like to get a loan for the Purchase price + rehab costs.  I do have a good chunk of change in savings as well if needed, but for my first rehab I'd like to only dip into that if the rehab goes over estimated cost.  Credit score is around 780's right now (not sure how much impact that will have).

Matt

Matt Cruz · Answer

Awesome, thanks for all the replies!  @Nathan Click I'll be in touch!

@John Broussard that sounds good.  Credit score will be no problem for me, and I do have some money set aside already for my first investment deal, but I also wanted to weigh the options of using hard money loan for everything, and then just dip into my personal funds if it goes over budget.

John Broussard · Answer

There are numerous options when it come to fix and flip loans, terms could range from 75 to 90% of the purchase price and 75 to 100% of the rehab cost or 70 to 75% of the ARV. Loans are usually 6 to 12 months with interest only payments.  Finding the right fit would depend on how much cash you have in the bank, experience and credit score. Adding your name to a mortgage is not required to qualify for fix & flip loans.

Nathan Click · Answer

@Matt Cruz - I can help give you some information on Commercial Financing if you like.  That may help you plan.  Feel free to reach out me.

Ryan E. · Answer

@Matt Cruz if you are BRRRR-ing a property then I assume it's in pretty bad shape and thus will not qualify for conventional financing. So you'd most likely need to initially use some combination of personal funds, hard money loan, home equity line of credit, private money etc for the purchase and rehab.

Once it's rehabbed and rented you will then want to refinance the property on a long term loan with traditional financing through a bank by getting a loan for up to 75-80% of the ARV and paying back the money you used to acquire the property and rehab it.

To find a list of hard money lenders go to the menu tab on BP, marketplace, hard money lenders, then choose your state.

I don't see the point in adding yourself to the loan on your personal residence. I would recommend looking into getting a home equity line of credit if your wife is on board. The good credit score will come in later when you go to refinance.

I'm looking to do this as well in my area and researching all this like crazy.