Owner Financing + Hard Money for Rehab - Is this Combo Possible?

[Rose Bartolome]

Hi, my name is Rose. I’m working on a BRRRR deal and want to sanity-check the financing structure before I move forward.

I found a property with a purchase price of $50,000, with the seller offering owner financing: $6,000 down, 12% interest, 2 points, 10-year amortization. The property needs rehab estimated between $24,000–$45,000 depending on scope (budget update vs. full renovation).

Some additional context on the deal itself:

• Estimated rent: $1,400–$1,800/month depending on rehab level

• Estimated ARV: roughly $75,000–$95,000 depending on rehab scope (budget vs. full reno)

• 3BR/1BA, ~1,300 sqft, single family, built early 1900s

• Property is in a lower-price-point Midwest market

My plan was to use the owner financing for the purchase and bring in a hard money lender to fund the rehab separately. Before I go further, I want to understand:

1. Is it realistic to get a hard money lender to fund rehab on a property where the seller already holds a 1st lien position via owner financing? My understanding is HMLs typically want 1st position, so I’m not sure this stacks the way I’m hoping.

2. Has anyone successfully negotiated a seller into 2nd lien position behind a HML, or gotten a HML to accept 2nd position behind a seller note?

3. If this structure isn’t workable, is it more common to just use one HML to cover both purchase + rehab, and skip owner financing altogether?

4. Given the rent-to-ARV numbers above, does this look more like a solid buy-and-hold than a true cash-out BRRRR to anyone with more experience running these numbers?

Would appreciate hearing from anyone who’s structured a deal this way, or from lenders who can speak to how they view lien position in these situations. Thanks in advance!

[Chris Seveney]

Quote from @Rose Bartolome:

Hi, my name is Rose. I'm working on a BRRRR deal and want to sanity-check the financing structure before I move forward.

I found a property with a purchase price of $50,000, with the seller offering owner financing: $6,000 down, 12% interest, 2 points, 10-year amortization. The property needs rehab estimated between $24,000–$45,000 depending on scope (budget update vs. full renovation).

Some additional context on the deal itself:

• Estimated rent: $1,400–$1,800/month depending on rehab level

• Estimated ARV: roughly $75,000–$95,000 depending on rehab scope (budget vs. full reno)

• 3BR/1BA, ~1,300 sqft, single family, built early 1900s

• Property is in a lower-price-point Midwest market

My plan was to use the owner financing for the purchase and bring in a hard money lender to fund the rehab separately. Before I go further, I want to understand:

1. Is it realistic to get a hard money lender to fund rehab on a property where the seller already holds a 1st lien position via owner financing? My understanding is HMLs typically want 1st position, so I’m not sure this stacks the way I’m hoping.

2. Has anyone successfully negotiated a seller into 2nd lien position behind a HML, or gotten a HML to accept 2nd position behind a seller note?

3. If this structure isn’t workable, is it more common to just use one HML to cover both purchase + rehab, and skip owner financing altogether?

4. Given the rent-to-ARV numbers above, does this look more like a solid buy-and-hold than a true cash-out BRRRR to anyone with more experience running these numbers?

Would appreciate hearing from anyone who’s structured a deal this way, or from lenders who can speak to how they view lien position in these situations. Thanks in advance!

 These numbers do not work. if you are buying it for 50k and renovations are going to be greater than the value you will never be able to refinance out of either loan and end up getting foreclosed on. if it is worth 75k after rehab the property should sell for around 25k max.