BRRRR using OPM to purchase property

5 Replies

Hi BP!

I have a meeting with a client I work with before. I'm looking to purchase the property using his money. Renovate with my HELOC at 3%. Rent out. Refinance in my name and take over the deed of the property. Once refinancing is done both of our capital would be paid back. My question is how do I protect my interest or structure the contract so I don't leave myself open if something should go wrong? Would like to hear more from investors using the BRRRR strategy with the purchase done with somebody else's money. What's a good percent of interest to offer the lender? How do you structure your agreements with the lender in regards to deed title of the property? Any stories any situations and any help would be greatly appreciated.

@Leon Doucette

Hi Leon, you can use a General Real Estate Partnership Agreement to protect your interest.  I have one to share if you want to add me as a colleague and then we can email directly.

The percentage to offer that would be fair is really up to you and your partner.  Best to talk that one out and find out what your partner's expectations are.

Good Luck.

As basic as it may sound - talk to the lawyer. They have seen all kinds of structures and may recommend a few options. JV agreement is a good way to go, its just a matter of figuring out little details. For example you said "purchase the property using his money". It mean the partner is getting a mortgage in which case you also have a bank to keep in mind. Is your client getting a fixed rate of return or % of profits? Etc-etc-etc. Too many small things that can make a big difference. BP post can't cover it all.

@Leon Doucette Also make sure that you have your refinance strategy worked out. If you haven't checked with various mortgage brokers/banks then you should. There is sometimes seasoning issues that trip up folks. Also the ltv may pose issues as well on the refi side. Double check your math. Measure twice, cut once. 

@Paul Sverdlin thanks for the reply in regards to your question the lawyer is our next step. Before this I want it to get a feel for how some people's structure their agreements. I'll give you a little jest of my situation. My client owns a chain of restaurants and has the capital to purchase the property. We have agreed on the loan costing me 3% the loan would be taken out over a 1-year. Depending on the deal and the money left in the deal on once the refinance is complete goes to him as well. And the property is turned over to me to complete the process. He has a targeted ROI that he wants to make plus his interest most of the properties I am looking to BRRRR his ROI between 12 and 15%. I would just like to structure our agreement so in the end if anything goes wrong my interests are protected. Not sure exactly how that works still very new to this. Would just like to have a little more info before I go to my lawyer.

@Aaron Gordy as always thank you I do considered what you said in my numbers always. Have been pre-approved for mortgage. Sitting on HELOC I'm I'm using for reno/holding cost. I love the reinforcement and being a construction electrician measure twice cut once is a moto I live by.