Private Money Financing BRRRR

4 Replies

Hello all- new here to posting on the forum but have been following and reading up the past few months and had a quick clarification question on private money loans and refinancing with BRRRR.

I would just like to make sure I am thinking about this situation correctly.

Let's say I were to buy a duplex for $80,000 that needed $20,000 in rehab that would put the ARV around $120,000 and was able to obtain a private money loan for the $100,000 at 10% interest could I then rent out one side of the duplex, move into the other side and refinance after a 12 month seasoning period? During the seasoning period I would pay back the interst on the loan, $10,000, and after refinancing pay the private lender his full $100,000 and then move on with my 30 year fixed mortgage.

Any help would be greatly appreciated as I am not sure if I am on track with this strategy or not.

Many private money lenders, who routinely lends money (i.e. not a family member or friend) will not lend for an owner-occupied project. Lending on an owner-occupied project requires licensing and opens the lender up to a bunch of other regulatory issues. One of the advantages of buying and renovating an owner-occupied duplex is the availability of FHA 203K loans with a low 3.5% down payment. If your rehab costs are only $20K, you may be able to use the 203K Streamline loan which can save some loan cost. If you've been following the forums, you've probably encountered the oft-used term "house hacking".

Another program you can use for an owner-occupied property is NACA. NACA is a non-profit which originates $0 down mortgages that can include rehab costs on 1-4 family properties. This program is a bit more tedious to get through, but can be a great program under the right circumstances. You can check them out at

Great in depth response, thanks Phil.

 Given it were a family member or friend loaning the money, as I have a list of them to reach out too, would the bank see any issue with refinancing this loan- or does the main problem with an occupied project fall with the private lender in most cases?

I will alo dive into more info on the 203K loan as that seems like a pretty solid option.

Hey @Ben Burds , if you are borrowing from friends and family, you will not need the 203 type of loan. The family can lend you the purchase, rehab, and whatever else that you need. They trust you as a person, relative, etc. Let the family help you purchase and rehab the property, THEN refinance when the house looks great and you have had a tenant on the other side for 6 months or a year.

The private financing is one of the greatest things out there. They get a great return, you get a big help with your project, win-win.

@Rick Pozos Thanks Rick- I'm having trouble wraping my head around why I would not go about doing things this way!

I'm currently still in school at Iowa State University (studying construction engineering) but hope to be able to purchase my first property next year at this time before graduation in May. These forums are a great tool for newbies like myself- I really appreciate the reply. 

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