Hello could somebody point me in the right way?

Question

Hello I have a home I want to perform the BRRRR strategy on but I’ll be honest my credit is crap from my old way I use to handle my finances but it doesn’t reflect who I am today. The home needs a lot of work and it’s for sale by owner. My girlfriend has good credit could I have her co-sign or how do I tackle this?

Kevin Romines · Answer

Hard money doesn't care about your credit. The only requirement after they have vetted the deal, (meaning as is value and ARV projections) will you have enough to cover the down payment and closing costs? Typical down payment is between 10-20% and you can negotiate that the seller covers your closing costs. But if the seller will not do that, then plan to spend another 4-6 points on closing costs on top of your down payment.

Some hard money will allow the seller to carry back 25% and then they will finance the rest of the purchase and a rehab. You may only have to cover closing cost at that point, but again, you can negotiate that the seller pays your closing costs and truly have no money into the deal?

Most hard money terms are for 9-12 months interest only on the loan term, so you have to be very diligent about getting your rehab done quickly and getting it on the market for sale or plan to refinance it?

If your girlfriend has good credit, she can refinance it and get all the money back out of it when done. The fact that its a rental at that point wont affect her debt ratio much either way as you will have rents to offset the mortgage payment, so if her debt ratio is good prior to the home, it should still be good at the point of refinance.

Once all is done, rinse and repeat your way to many homes!!!

I hope this helps.

Jonathan Marcus · Answer

Ask the owner, if you can give him enough down payment will he consider taking monthly payments for the balance of his equity? What you're trying to figure out here is, will he consider doing owner financing on this deal (will he be the bank). If he says yes, then you only need to work on getting the down payment amount and rehab money. Your credit shouldn't be an issue.

Once it's renovated, cash flowing and you've increased its value, then you can shop around to refinance the property and cash out your seller.