BRRRR - Buy, Rehab, Rent, Refinance, Repeat

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Kevin Dombrowski
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Can you BRRRR a family members house?

Kevin Dombrowski
Posted Jul 25 2022, 10:29

Hey guys, fairly new investor here. I only have 1 property so far. So, If a family member has say 40k left on a home loan of 150k and is willing to sell it to me for 125k, is it possible to get a private or hard money lender to set this deal up? I would want to buy it for 125 and then rehab it a bit and cash out refi and keep the family member living there. Do you guys think it would be an issue with the lender that I would be buying it under market price? I haven't done a BRRRR yet and I'm not sure if this specific situation would work. Any insight would be greatly appreciated! Thanks!

Hartford, Connecticut

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Steven Goldman
  • Lender
  • Pennsylvania
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Steven Goldman
  • Lender
  • Pennsylvania
Replied Jul 25 2022, 10:43

@Kevin Dombrowski

If you are in fact buying the property from your family member and they are executing an arms length one year lease with security deposit, for fair lease value, you should be able to both get a fix and flip loan as well as also cash out at the completion of the construction project. Typically you will have to wait six months from date of purchase to refinance for the higher ARV. It would be unethical and possibly fraudulent for you to be mortgage rescuing your family member through this process. Good luck.

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Andrew Postell#1 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
  • Lender
  • Fort Worth, TX
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Andrew Postell#1 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
  • Lender
  • Fort Worth, TX
Replied Jul 25 2022, 15:21

@Kevin Dombrowski so the answer here is yes, you can certainly get a hard money loan or a private loan to purchase this property. I can't see where the ARV is though...so maybe some math needs to be worked out here a little but the short answer is, yes. Then to BRRRR the property you would need a loan for the refinance step. Depending on which loan type you use on that step will determine if you need a formal lease or not. For example, if your income is strong enough, and if you are using Fannie/Freddie to refinance, you may not even need a lease to refinance. We also don't want to work with any lender that requires us to wait 6 months to refinance at the full value. Full value needs to be assed as soon as my rehab is completed. If no rehab is needed, and I'm buying the property at a great deal, then no waiting at all. I should be able to get full value from day 1 of ownership on a property. You can certainly use whatever lender you want but there are plenty of lenders that will use the full ARV, with no seasoning, on a recent purchase. Hope all of that makes sense.

Lender Texas (#392627)