Reservations about using Hard Money

1 Reply

I have a deal that would make a great BRRRR. $60,000 asking price, $90,000 rehab, $200,000 ARV. Cashflow positive $300 a month using the 50% rule financing 75% LTV when done. Obviously I'll dig deeper into the expenses, but at face value it looks pretty good.

I have $115,000 right now. So, I need an additional $35,000 to do this deal. I’ve never considered hard money before, but I like this property and it’s in an up and coming gentrifying neighborhood  that is seeing quite a bit of appreciation. 

I've always looked at hard money as too risky. If the refinance doesn't go as planned I've got to come up with $35,000 on the spot. I could use credit cards or get a personal loan of $35,000 but I'm worried about my DTI, and it effecting the refinance. Right now we have zero debt and extremely high credit. Both of us 800+. We save quite a bit of money as well $2,500 - $3,500 a month. But, our income actually isn't that high. $80,000 - $100,000 between the 2 of us.

My question is, how does hard money affect our DTI? Will it show on our credit report when we go to refinance?

Originally posted by @Jonathan Hulen :

I have a deal that would make a great BRRRR. $60,000 asking price, $90,000 rehab, $200,000 ARV. Cashflow positive $300 a month using the 50% rule financing 75% LTV when done. Obviously I'll dig deeper into the expenses, but at face value it looks pretty good.

I have $115,000 right now. So, I need an additional $35,000 to do this deal. I’ve never considered hard money before, but I like this property and it’s in an up and coming gentrifying neighborhood  that is seeing quite a bit of appreciation. 

I've always looked at hard money as too risky. If the refinance doesn't go as planned I've got to come up with $35,000 on the spot. I could use credit cards or get a personal loan of $35,000 but I'm worried about my DTI, and it effecting the refinance. Right now we have zero debt and extremely high credit. Both of us 800+. We save quite a bit of money as well $2,500 - $3,500 a month. But, our income actually isn't that high. $80,000 - $100,000 between the 2 of us.

My question is, how does hard money affect our DTI? Will it show on our credit report when we go to refinance?

HM should be your last option. Make sure you have looked at all the other options unless the HML is for rehab purposes. But you have a lot of funds so those should be used for rehab if the numbers on your deal can allow for it.