Can You BRRR With Poor/Bad Credit?

Question

Hello everyone - I recently have sold a business that I over-leveraged and have quite a bit of debt left from it. Due to this, I am left with very poor credit. I am hoping to purchase my first BRRR property but am worried I will not be able to refinance any time soon. Any ideas of how to combat this?

Ryan Gifford · Answer

Thank you @Amanda G. and @Eric Carr. In the case of BRRR where I would want to refinance, do hard money lenders do this? I would imagine the interest would cost too much. It seems I would need a partner who would be willing to take the mortgage into their name. Would that be a reasonable solution? I am hoping to buy and hold.

Amanda G. · Answer

@Ryan Gifford, We're strangers here, so you'll have to make your own decisions but I agree with @Frank Wong. You'll want to get your credit up, and talk with banks about what they need to see before they will do the loan. In the meantime, if you have capital, you might be able to put it to use in someone else's deal and gain experience and some financial return while you wait.

Frank Wong · Answer

Hi Ryan,

You don't want to go HML if your plan is to refinance to a conventional loan.  The interest will kill your returns on your rental.  Conventional lenders will base their decision on your credit and if your credit is bad you won't have a way out.  I am sure there is a portfolio lender out there that would lend to you but that's a low percentage play.  Don't wish and pray for something that will be very hard to get.  Sit and wait for your credit to be better before jumping in.

Eric Carr · Answer

I see. You'd need a hard lender to buy, which is common anyways, and then would refinance with a bank.

I can see how you might need to bring in a partner at that point

Eric Carr · Answer

Local banks, hard money lenders, rich relatives, etc. There are ways, it might come down to who you know, but as with a lot of things, loans can be expensive without great credit

I'd start talking to hard money lenders in your area. these types of lenders are more interested in your plan and the asset rather than your personal credit score. So become very valuable in that sense, that you can turn properties around and make them money and you will find the money

Amanda G. · Answer

It is all about relationships. Before you get yourself into a deal, run scenarios by your local bankers and credit unions. You are wise to be concerned, legwork up front will save you much stress and potential trouble down the road.