How Can I Receive A Hard Money Loan With No Money Down?

[Account Closed]

I, along with my dad and brother are new to renovating properties. We are in the planning stages to align everything to begin renovating our first single-family residence.

My dad, and brother are residents of Georgia and would be applying for the loan because their income should be sufficient enough, and is also more steady than mine. The project's location would be in Los Angeles because I currently reside here, and I'm a real estate agent who would be able to assist in purchasing and selling.

What are some ways where we can eliminate the down payment on a purchase transaction? Is it possible to find an investor to contribute the down payment amount in order to receive the loan?

'Scenario' - A property that we are interested in recently expired on The MLS, and was listed at $1,099,000. An offer can be presented for less than the list price (Estimated: $900,000) because home is currently in demo state. The offer would include a request for the seller to pay for the buyer's closing costs.

Also, we have been researching a few contractors to help in the remodeling process.

Please provide any other information that can be helpful in our journey to completion.

[George Krajacic]

Hi Japeth,

By looking to eliminate down payment you are trying to eliminate what is most important to equity based hard money lender (HML). Equity is what gives security to HML that if everything goes wrong and they have to foreclose and wholesale the property that they will still get all their money back. HMLs rely on equity and not on your FICO score or your net worth. Many HML do not care where the equity comes from. It can come from a partner, 2nd position loan or additional property with necessary collateral. I am a hard money lender in your area so let me describe the process that average HML would go thru in deciding whether to make a loan on the property you described. First you would have to provide the following: a. a signed purchase contract to buy the property, b. Itemized cost of repairs, c. ARV value of the property, d. Bank statement showing that you have enough money to pay for all loan closing costs including 25% down payment and 2 to 3 loan points and enough of reserve to pay 6 month of payments. As you can see it is starting to be a substantial amount of money. With $900,000 purchase price you would need the following:

$225,000 - down payment

$13,500 - Points

$37,125 - 6 month of payments @ 11% (paid monthly)

$800 - loan docks

$276,425 - Total Funds required (some or all of this funds can come from the partner or the 2nd loan)

Assuming that renovation costs is $127,000 the refurbished property would have to sell for around $1,285,000 price for a flip to be safe and profitable. Since you are new at flipping I would suggest starting with a less expensive property maybe around $300,000 purchase price with $428,000 ARV. This way, if things go wrong the problems are much easier to handle. I would also suggest for you to attend Numerous "Real Estate Investment Club" meetings in your area. It is good place to meet other people with same interests. Also clubs provide very informative educational seminars. If you visit my web site you will find a list of different Investment clubs you could attend.

Good luck,

George