Buying first duplex

[Heath D Wallace]

I am using a conventional loan to buy my first duplex. I would like to eventually BRRRR this property and use a DSCR loan so that it's not on my credit report. Should I have used a hard money lender first?

One unit is vacant and the other tenant is moving in October.  The property could needs around $6k in repairs.  I want to update the kitchens & baths. I have a $43k estimate.  Buying for $255k and it appraised at $265k.

[Juan Mateo]

Heath, great question - and honestly, you're asking the RIGHT question at the wrong time (but we can fix this).

The short answer: YES, you should have used private money first. Here's why:

Your Current Situation (Conventional Loan):

• Purchase: $255K
• Repairs: $6K + Renovations: $43K = $49K total rehab
• All-in: ~$304K (plus closing costs)
• Current appraisal: $265K

The BRRRR Problem You're About to Hit:

Most conventional lenders require 6-12 month seasoning before you can refinance. That means:

• Your money is STUCK for a year minimum
• You're paying 6-8% on money you can't recycle
• You can't do your next deal during that time
• The property sits on your DTI, limiting future purchases

What You SHOULD Have Done (Private/Hard Money Route):

Phase 1 - Acquisition & Rehab (Months 1-4):

• Hard money loan: 100% purchase + 100% rehab
• Interest-only payments: ~$2,500/month
• NO seasoning requirements
• Doesn't hit your DTI immediately

Phase 2 - Stabilization (Months 5-6):

• Both units renovated and rented
• New appraised value: $350K-$380K (based on your $43K upgrades)
• Strong rental income established

Phase 3 - Refinance (Month 6-7):

• DSCR loan at 75% LTV
• Pull out $262K-$285K
• Pay off hard money loan
• REPEAT with your capital back

Your Actual Numbers with Private Money:

Purchase: $255K (100% financed) Rehab: $49K (100% financed) Total loan: $304K After Rehab ARV: $360K (conservative) DSCR Refi at 75% LTV: $270K Your capital recovered: ALL OF IT Left in deal: $0-$10K Monthly cash flow: $800-$1,200

VS. Your Current Conventional Route:

Down payment: ~$51K (20%) Rehab: $49K (out of pocket) Total capital tied up: $100K Stuck for: 12 months minimum Can't do next deal: TRUE

But Here's the Good News:

You're only in contract (or just closed). Depending on your situation, you might be able to:

1. Bring a private money partner NOW to fund the rehab (we do this)
2. Do the renovations quickly (complete by October when tenant leaves)
3. Refinance in 6 months into DSCR loan
4. Use the pulled equity for your NEXT deal - the RIGHT way

Critical Question for You:

After you put $49K into this property, what's your realistic ARV?

If it's $350K+, you have $46K-$96K in equity you could pull out in a DSCR refi. That's your next down payment.