Looking for Lender Guidance on $20K Seller Credit Deal Structure

Houston, Texas
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Looking for Lender Guidance on $20K Seller Credit Deal Structure

Chris McDanielPro Member
Investor · Houston, TX · Member since 2024 · 8 posts · 2 votes

Hi BP Community,

I’m working on a deal in Houston/Pasadena, TX and could use some insight from those with experience.

  • Purchase Price: $185K
  • Seller Credit: $20K applied toward rehab at closing
  • Effective Net Purchase: $165K
  • ARV (conservative): $220K – $230K
  • Rehab Budget: ~$20K–$25K (HVAC, bathrooms, floors, cosmetics)
  • Exit: Refi into DSCR or conventional in 12–18 months

I’m trying to confirm with lenders how the $20K seller credit will be treated:

  1. Will hard money lenders allow this structure and apply the credit directly to rehab?
  2. If not, how do I best position this so it’s workable?
  3. Any recommendations for investor-friendly lenders (HML or DSCR) in Houston that have handled seller credit situations?

Goal is to make this a clean BRRRR deal with minimal cash in. Appreciate any advice or lender recommendations!

Thanks in advance!

— Christopher McDaniel

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Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
1y

Typically credited it as cash required to close as long as appraisal comes in clean. 
you would still need rehab funds or get financing on those:

I would be concerned about refinance as the ltv when renovation is complete is very high and DSCR typically on refinance may not go as high as you need

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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    1y

    Typically credited it as cash required to close as long as appraisal comes in clean. 
    you would still need rehab funds or get financing on those:

    I would be concerned about refinance as the ltv when renovation is complete is very high and DSCR typically on refinance may not go as high as you need

    7e investments53 Reviews
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  • Chris McDanielPro Member
    OP
    Investor · Houston, TX · Member since 2024 · 8 posts · 2 votes
    1y

    Thanks Chris, really appreciate you taking the time to share your insight!

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  • Derek BrickleyBusiness Member
    Lender · Ann Arbor, MI · Member since 2021 · 692 posts · 237 votes
    1y

    Hey Chris!

    Good deal!! What you'd probably want to do is have those funds in escrow to payout the rehab as completed. For DSCR, there is normally caps on how high seller concessions would be and $20k would be over most of those guidelines. Not a HML but from the DSCR perspective that's what would be needed.

    If you purchase with a HML, keep in mind the seasoning requirements based on your rehab timeline for cashing out. If you do have questions on that though feel free to reach out

    [email protected]734-645-7722
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  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    1y
    Quote from @Chris McDaniel:

    Hi BP Community,

    I’m working on a deal in Houston/Pasadena, TX and could use some insight from those with experience.

    • Purchase Price: $185K
    • Seller Credit: $20K applied toward rehab at closing
    • Effective Net Purchase: $165K
    • ARV (conservative): $220K – $230K
    • Rehab Budget: ~$20K–$25K (HVAC, bathrooms, floors, cosmetics)
    • Exit: Refi into DSCR or conventional in 12–18 months

    I’m trying to confirm with lenders how the $20K seller credit will be treated:

    1. Will hard money lenders allow this structure and apply the credit directly to rehab?
    2. If not, how do I best position this so it’s workable?
    3. Any recommendations for investor-friendly lenders (HML or DSCR) in Houston that have handled seller credit situations?

    Goal is to make this a clean BRRRR deal with minimal cash in. Appreciate any advice or lender recommendations!

    Thanks in advance!

    — Christopher McDaniel


    This will be a lender specific question as guidelines are different from HML to HML but generally most lenders would apply it towards the principal balance and the cash to close. You may want to ask your hard money lender if they allow the remainder to be applied towards the reimbursing you for the rehab

    [email protected]818-269-7983
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  • Tony B. Brown
    Lender · NY · Member since 2021 · 6 posts · 0 votes
    1y

    Hi Chris,
    I saw your post about the Houston/Pasadena deal. solid numbers and a clean BRRRR setup. I work with private and bridge funding sources that can handle structures like yours, including cases where seller credits are applied toward rehab.

    I'd be glad to review the deal details and see how we can structure it to keep your cash-to-close minimal and set you up for a smooth DSCR exit.

    I just sent you a connection request, once you accept, we can continue the conversation there.

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