How do I find the money??

[Bharat Joshi]

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]

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.