Conventional/Commercial Strategies to reach 0% down?

Question

Hello,

I've just recently gotten into real estate investing. I basically started researching in the past month or so. I'm currently trying to get pre-approval for my first investment property near Atlanta, Ga.

The property is fairly cheap and it will be rent-ready when I buy it. I'm considering forming an LLC this week.

Unfortunately after talking to many lenders, I've realized I don't actually have a clear idea on what kind of lending strategy I want to go for.

I want to get as close as possible to a 0% down with a good cash flow (who doesn't? haha). So I'm considering a commercial/conventional/DSCR loans with options for HELOC, home equity, interest-only, and 40-year programs.

It seems difficult to find good options that get me what I would like, which may be understandable.

Is there any advice anyone can give here? Are there options I'm not aware of? Am I just talking to the wrong lenders? Should I suck it up and use my own capital for my first couple investment properties?

Ideally, I wanted to save my own capital for if I need it for bigger properties in the future, but not sure if that is a sound idea either.

David M. · Answer

@Rohit Nadgauda

First off, LLC's are not always necessary for investing, especially if you are doing residential properties..  You need to operate them properly to maintain the corporate veil and you won't be able to use conforming residential loans --- don't listen to lenders who say to quit claim the deed the Title back and forth to leave the mortgage in your name...  Everythign really needs to be in the LLC's name...

0% down is pretty difficult.  Only VA and USDA loans allow for 0% down and in certain circumstances.  These have owner-occupation requirements.

DSCR and hloc's won't let you go to 0% down.  DSCR's have pulled back to 80% LTV and hloc MIGHT do a combined 90% ltv (but I thought again more like 80% for an investment property).

I don't know just because you can't 0% down that you just to using pure cash..  There is still value to leveraging.  I don't understand what sort of lending did you find that you didn't like?

David M. · Answer

@Rohit Nadgauda

The advantage of using your name is taking advantage of conforming loans, easier transacting, you could represent yourself in court if you had to and/or wanted to.  But, if you good with it..  Oh, don't forget CA has that ~$800 annual fee per LLC which can add up

Yes, its difficult to find fixed rate loans for what you are doing.  Yeah, what you are doing is so aggressive of course the rates will be really high.

Money isn't available nor is it cheap, especially recently.  you could maybe do it if you had other properties with which to work.  For example, refi or hloc an existing property to get the money down...

Nicholas L. · Answer

@Rohit Nadgauda

the way to get to "0% down" is not by actually putting 0% down at closing, but by adding value.  for example, the BRRRR method.  I'm not saying you should BRRRR, I'm just saying that this is one way to "leave 0% in the deal."  you're likely going to have to pay money to acquire property.  but once you have it, there are options.

can you house hack?

David M. · Answer

@Rohit Nadgauda

yes, hloc and heloc are the same to me...

Again, with a LLC you need to use commercial / non-residential financing.  Its not the little filing fee that is the expensive part, its everything else to operate it.

Rohit Nadgauda · Answer

Thanks @David M.,

I understand what you're saying. Btw, the LLC would be in Ga, and I think the rates are $50, so that's much better lol.

I have another property, but my rate on that one is <3% so no way i would cash out. Is an hloc the same as a heloc? in that case i've seen high rates for that too.

Thanks @Nicholas L.,

I get you. For now, since it's my first investment property, I don't want to get into BRRR. I may consider it for my next property, though.

I may also consider house hacking. The closest I've gotten is renting out my other room in my primary residence.

Thanks for you input, guys. It seems like I don't have many options lending-wise. Will continue to be on the lookout.

Rohit Nadgauda · Answer

Thanks for the quick comment!

Yep, if I create an LLC, I would keep everything in it. I wouldn't have anything in my name. I'm not sure if there's any point to keeping anything in my name anyway, since I'll be getting all the revenue anyway but can keep the liability bound to the LLC for the most part.

When I say 0% down, I mean with potentially 2 loans. A couple lenders have said this may be feasible with them, but only problem at that point is that the rates seem to shoot up and I'd be in a negative cash flow.

That's why I was wondering if I'm missing something fundamental here and there are some other methods of lending that I'm not aware of.

Conventional/Commercial Strategies to reach 0% down?

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