I am in the middle of planning to buy a BRRR property in the coming months. I have listened and read a good amount of BP material, but today I listened to the BRRR Podcast with only Brandan and David. David talks about using cash, hard money, or private money for the INITIAL purchase. I was intending on using a traditional 20% loan for my initial purchase and refinancing through the same bank, or others, whatever is best. Am I missing something? What is the best way for someone who has both options, but would be simpler for me to do a loan?
Cash, Hard Money, or Private money are short terms options that provide cash faster and easier than banks. Typically you won't go through the whole underwriting process that banks require. Banks also require 6-12 month seasoning before they'll refinance a loan. The first three options will do loans as short as three months then allow you to refinance and pay them back. Banks also won't loan for rehab projects which is an essential part of the BRRR process.
With a cash out refinance the bank will typically lend on 80% of the homes value. Meaning that you'll be able to get a loan for more than you put into the house because of the rise in value due to the rehab. You'll have enough money to pay back the short term loan and then some money to put into your next deal with another short term loan.
If you go the conventional 20% bank mortgage then you're money will be tied up for 12-24 months.