Financing an owner-occupied rehab (kind of BRRRR) project

5 Replies

Trying to figure out the best way to finance my project. It's essentially an owner-occupied BRRRR project. I plan to purchase a project SFR (or something close to it), rehab it to force equity, live in it for 12-18 months, and refinance when it makes sense.

Do you have any recommendations for how to finance this project? Ideally, I'd like to be in with as little cash out of pocket as possible. Please share your experience and/or perspectives on this as I begin shaping this project.

Thanks in advance.

    @Kyle Henry , it depends on what condition your purchase is in.

    If its a functional home, you can buy with an FHA loan or a conventional conforming loan. You can self fund the rehab using credit cards since its a functional home that may be doable.

    If its not a functional home, then you could purchase with a FHA 203K loan that allows you to budget for rehab or use a hard money loan to purchase and rehab and then refinance into a conventional loan.

    @Kyle Henry I agree with Kevin. The condition of the property is key. Ideally, the best "low out-of-pocket" options are going to be standard FHA/Conventional loans. One other thing to explore is if the property is ALMOST liveable, and just needs a couple of small fixes, you can utilize a repair escrow.

    Example:

    House needs toilets installed, windows repaired, and flooring in the living room (total ~$10k). You would do the standard loan (3-5% down) plus an extra $15k (1.5x repair costs) into a repair escrow with the lender, who would then disperse the funds to the contractor once the repairs are completed. Typically those repairs are required to be done within 60 days of closing, and there's a limit to the extent of the repairs. 

    @Kyle Henry if you are buying a primary home that needs renovations then you can use both FHA and/or Conventional renovation loans to do the renovations. Not every lender will offer these loans though. So if this is the route you need to go make sure you speak to lenders that are very knowledgeable about this product and that offer it. If you are looking to purchase in Nevada then try posting in the Nevada forum to see if anyone has a good lender that is local to you that can guide you with renovation turn times, specialists, etc. Thanks!

    @Brad Sneckner Thanks a lot. Do you know of repair escrow options beyond HUD & USDA?

    @Andrew Postell Will ask this question in the Nevada forum. Thanks a lot for the insight and guidance 🙏🏾

    @Paul Welden Awesome. I've learned a bit about the Fannie Mae Homestyle and 203k loans but am new to the CHOICERenovation option. Will do some digging. Thanks a lot.

    @Kevin Sobilo, thanks a lot!