Using Hard money for buy and hold

9 Replies

So new to world of real estate discover it in june and been reading, listening, to podcast, going through the forums search ton of information. My plan is get into buy and hold rental and the occasional flips but main focus now is buy and hold. I been think of getting a hard money to purchase and rehab a distressed property and do a cash out refi to pay the hard money back, it seems the most fastest way and smartest if the number right it would generate more cash flow instead of putting 20% down on a property already rent ready or close to it.

Little info on me I am 27 in the ATL area I plan to really pull the trigger on this in early 2020 by then i will have around $10k saved up in the mean time I plan to keep doing research this winter I will talk to few local bank and credit union on their cash out refi to see their requirements I am currently around mid-to-high 600s credit score. I purchased my primary home 2 years ago and there are few small jobs here and there that needs to be done so i am going to find some contractors and test them out on few little things in my current home to find a good one and build a relationship so when i purchase my investment i have 1 or 2 i worked with and can trust.

ideally right before i go talk to hard money lender i want to have my bank/credit union already on board know my plan to refi with them when it all said done

I have  my contractor all ready looked at the property with me and gave me detail rehab estimate so soon i purchase the house we can get to work. 

So for starting out is this a good plan? Should i look at other options of getting started? 

@Denzel Ray

Hello Denzel,

Welcome to BiggerPockets. It’s great that you have momentum and a plan but one thing I learned starting out is that things never go as planned.

My first piece of advice would be to save more money. While it is commendable that you'll have $10k saved, will that be enough to cover what you're trying to do? Even with a hard money loan, very few lenders finance 100% of cost especially to new investors. The standard is typically 75% LTV. Then there will be financing cost, holding cost, etc.

Another thing to keep in mind is that the BRRR strategy works best when a property is bought with low leverage or all cash.

What’s your property buying criteria? How do you plan to find tenants? How is the property going to be managed?

Keep working on defining your investing strategy.

Just my 2 cents.


I think what you're trying to do is awesome. Yeah having more money saved would be ideal but if you find the right property I think you could make it happen with enough grit. Due to your credit score and low downpayment you may want to look at credit unions that do commercial lending. Typically they require 20-25% down payment however they're more receptive to "creative financing". If you can find a solid property with a motivated seller you can try to get them to give you a loan (or take 2nd position on the property) to cover the down payment. Then you'll just have to figure out where to get your repair budget from. 

If you find the right property with great headroom to make a solid profit then it shouldn't be too hard to come up with the money you need for renovations. If it's a good one a hard money lender should have no problem lending on it. If you have trouble with them then it might not be that great... but that's why you have the inspection and financing contingency in place so you can back out. Ideally you get some offers from hard money lenders so you confirm it's a solid plan and then you try to raise the money from friends and family at a lower % rate. If you can do that then you don't even have to worry about refinancing it right away to take money out. You can just own the property, with very little of your money into it,and see how it goes. If you don't like it then you can sell it, pay off the loans and take the sweat equity as your pay. If you do like it then you can refinance it after a couple years to pay off the sellers 2nd position and the personal loans for friends and family and then it's just you and the bank in on the property.

At least that's the way I would approach it. All that being said it wont be easy, just like with anything in real estate the hardest part is finding the GR\EAT deals. Raising the money will be easy, if it is a GREAT deal. 

Best of luck!

Thank you both for the advice i don’t plan to find the best amazing first deal but I do want to be happy knowing I thought of every solution and possible outcome so I have little regrets on my first deal.

I’ll keep researching different strategies and networking and saving more money. I know I can come up with rehab budget from family so maybe be better regular conventional loan.

@Denzel Ray

Just set a goal and go for it. You can do it. No need to rush, real estate investing has been around for ever and it isn’t going anywhere.

Get to a place where you feel comfortable with pulling the trigger.

I’m in Atlanta as well, so don’t be afraid to reach out with any questions you may have.

@Denzel Ray

Just wanted to chime in here to mention that there are other avenues to take in your case. You may be able to find private money lenders in your area that may provide lending based on appraisal (of the as-is value) of the property. Depending on how much you have the property under contract for, and how much you have saved at the time this may be an option. These types of lenders do not focus on credit, work history, etc. as the property is what dictates the loan amount. I cannot guarantee this will work in your case, but just know that this type of option exist. 

Best of luck with what will hopefully be a rewarding career in real estate!


Ty Henry Jr.

So his another idea I was thinking about and would love some feedback.

What about getting a commercial loan for a property that’s not falling over but just outdated and need some serious TLC and still prices under market. Put a 20-25% down payment and use a heloc on my primary home for the Reno, then refinance to pay the Reno back?

Has anyone done that and had good result?

I figure with a already low mortgage than using hard money that should cost me less holding cost while I’m fixing it up to rent out