How do I find the money??

Question

I can place properties under contract but I can't find the financing, I have contractors who are ready to work, and a realtor to list. I don't have much for down payment, and I'm hearing that you don't need money to start. How do you secure 100% financing as a new investor? Unfortunately, there are many who take advantage of someone starting out, so what should I keep an eye out for when looking for a private money lender?

Tanner Lewis · Answer

100% financing is possible but not practical. Hard money lenders that offer it can do 100% LTC and 70% LTV with a higher interest rate and more points than other lenders. You get looped in, thinking they will fund 100% of the deal. Then they get the appraisal done, and the ARV looks too low, so they have to cut leverage to the 70% LTV loan amount.

An example of this would be:

Purchase a deal for $130k, needs $30k rehab, $200k ARV. 100% LTC is $160k, but 70% LTV is $140k, meaning the loan amount would be $140k, even though they "offer" 100% financing. You would go into this deal thinking they will hand you $160k, and then after two weeks, when the appraisal comes back, you have to bring $20k to the table to close.

To make the numbers work on that deal and get 100% financing, you would need to reduce your reno budget by $20k. These deals are very hard to come by, and even when you do think you see one, the appraisal comes in lower than expected, making you cut leverage.

Bharat Joshi · Answer

Thank you for this. I’ve run into this exact issue where they reduced the loan amount. It seems like I need to be sitting in at least $40k to get started as a new investor or partner up with an investor who has the money to bring.

Richard Loniewski · Answer

There are investors out there with money looking to partner on deals, that's how I got my first one done. Need to network and vet out any potential JV partners. There is also friends and family that may want to invest with you if deal is strong. There are many scammers out there so be careful.

Caleb Brown · Answer

Either you find a partner who will supply money and do all the leg work or save money up. Personally I would hustle and save money. The likely hood someone will just give you money especially with not any deals under your belt is rare. Once you do have money saved go the hard money route, they make it easier to get into. But again I think it's best to budget/save before putting the cart before the horse.

How do I find the money??

Most Popular Reply