Saint Louis, MO · Member since 2017 · 16 posts · 4 votes
If you are doing the BRRRR method, is it recommended to purchase the property initially with a conventional mortgage or to borrow from a hard money lender? Will either one affect how the refinancing process works down the road? For instance, if I purchase a property with a conventional mortgage, will it be harder to refinance this in 6-12 months after the property is repaired and the ARV has increased?
Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
7y
@Austin Hanse yes, you can absolutely use conventional money in the beginning and the HomeStyle loan even allows for renovations as a part of it. Most of the time you can't purchase a property with Fannie/Freddie money mainly because they take too long to close. This is "in general" of course but 99% of the time successful investors target "off market" deals and buy them with a deep discount to renovate. Often you MUST close quickly because the owner might be facing foreclosure...or a myriad of other problems that are out there. So often you must use either Hard Money or some other acquisition strategy just because those types can close quickly.
It certainly is possible to use conventional lending but probably not likely in most successful equations. Keep asking and we'll keep answering! Good luck!
Rental Property Investor · Greenwich, CT · Member since 2015 · 4k+ posts · 2k+ votes
7y
@Austin Hanse, however you get the property is fine, as long as you're figuring the costs into your analysis.
The upside of HML is the short closing. It's almost like offering cash, which can give you a great negotiating position.
The refinancing shouldn't be affected either way. Key is to have the conversations with the refi bank at the beginning of the process. Make sure they know what you're trying to do and start building that relationship.
Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
7y
@Austin Hanse yes, you can absolutely use conventional money in the beginning and the HomeStyle loan even allows for renovations as a part of it. Most of the time you can't purchase a property with Fannie/Freddie money mainly because they take too long to close. This is "in general" of course but 99% of the time successful investors target "off market" deals and buy them with a deep discount to renovate. Often you MUST close quickly because the owner might be facing foreclosure...or a myriad of other problems that are out there. So often you must use either Hard Money or some other acquisition strategy just because those types can close quickly.
It certainly is possible to use conventional lending but probably not likely in most successful equations. Keep asking and we'll keep answering! Good luck!
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
7y
Yes, it is possible to close a BRRRR deal with conventional financing but it is very rare in my market at least. Cash or hard money are the main ways people purchase BRRRR deals here in CT for the most part.
Lender · Austin, TX · Member since 2018 · 241 posts · 136 votes
7y
Hi @Austin Hanse - all of these are good answers, though be sure and clarify with your original lender if there are any fees associated with the getting out of their loan early. Most of the time it isn't an issue, but i've seen lenders charge fees for such a loan.
Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
7y
Private loans from ma and pa lenders are, in my opinion, the best way to finance up front (unless you can buy for cash). It's much cheaper than hard money loans, although you will have to find private lenders and convince them to lend to you.