What Would YOU DO had POF but no DOWN ?

Consultant · Providence, RI · Member since 2015 · 117 posts · 37 votes

If you had POF for up to $500k but NO down payment funding from any sources = IRA, Family, Bank Loans, Credit or Income . . .

What would YOU DO to purchase a BUY & HOLD commercial 10 - 12 unit investment property for CASH FLOW with a Min. Cap Rate of 8%, ROI > 70% and vacancy rate < 5% annually.

Thank you for any help BP Friends!

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Wayne Brooks

Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes

10y

I do a reality check on whether that $500k is Really available to me under my current circumstances. Also, "if you had a POF for $500k..." means You have $500k, but I'm guessing in this case someone is promising to fund you, that actually has the $500k, so you Really have a supposed "preapproval" for $500k, not a POF.

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Wayne Brooks
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
10y
I do a reality check on whether that $500k is Really available to me under my current circumstances. Also, "if you had a POF for $500k..." means You have $500k, but I'm guessing in this case someone is promising to fund you, that actually has the $500k, so you Really have a supposed "preapproval" for $500k, not a POF.
8 Reply
Monique Rene Coates
OP
Consultant · Providence, RI · Member since 2015 · 117 posts · 37 votes
10y
Originally posted by @Wayne Brooks:
I do a reality check on whether that $500k is Really available to me under my current circumstances. Also, "if you had a POF for $500k..." means You have $500k, but I'm guessing in this case someone is promising to fund you, that actually has the $500k, so you Really have a supposed "preapproval" for $500k, not a POF.
Hi @Wayne Brooks : I have the funding available, in a loan as POF for real estate, as long as I can provide the down payment. I would not have asked the question if it wasn't REAL or couldn't be made REAL.
1 Reply
Al Wilson
Investor · Daphne, AL · Member since 2014 · 1k+ posts · 242 votes
10y
I would save my money until I had the down payment in the bank. Then, I would determine whether there was a property available for purchase that fit my long-term investment plan and was in my price range. Good luck.
1 Reply
Jordan Williamson
Rental Property Investor · Cape Coral, FL · Member since 2012 · 427 posts · 186 votes
10y
It seems like you may mean a pre-approval/pre-qualification, but to answer your question I would recommend you network (local REIA etc) and find a partner. There are many real estate investors that are heavy on cash and light on the ability to get bank financing. You find someone like that and they will be happy to pay the downpayment for the opportunity to use your bank financing.
Good luck and remember your just as valuable as the investor with downpayment funds so make sure to find the RIGHT partner and not just any random.
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Monique Rene Coates
OP
Consultant · Providence, RI · Member since 2015 · 117 posts · 37 votes
10y
@Al Wilson, @Jordan Williamson I actually thought BP was used for networking and finding a JV partners. I have not had a vehicle in almost 3 years, so don't get to go out much to network or REIA meetings etc. Long story.
Thank you both for the advice, I do appreciate it.
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Jordan Williamson
Rental Property Investor · Cape Coral, FL · Member since 2012 · 427 posts · 186 votes
10y
Originally posted by @Monique Rene Coates:

@Al Wilson, @Jordan Williamson I actually thought BP was used for networking and finding a JV partners. I have not had a vehicle in almost 3 years, so don't get to go out much to network or REIA meetings etc. Long story.
Thank you both for the advice, I do appreciate it.
Biggerpockets is a great tool to network as well, but it is not the only tool. Networking with locals who know your market and can meet with you in person is a great option.
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Monique Rene Coates
OP
Consultant · Providence, RI · Member since 2015 · 117 posts · 37 votes
10y
Originally posted by @Jordan Williamson:

Originally posted by @Monique Rene Coates:
@Al Wilson, @Jordan Williamson I actually thought BP was used for networking and finding a JV partners. I have not had a vehicle in almost 3 years, so don't get to go out much to network or REIA meetings etc. Long story.
Thank you both for the advice, I do appreciate it.
Biggerpockets is a great tool to network as well, but it is not the only tool. Networking with locals who know your market and can meet with you in person is a great option.
Agree. For me though, my local market is actually not where I'd like to start investing.
1 Reply
James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
10y
I would start saving up until I had the down payment. If I did not earn enough money to save I would get another job or do Uber or something of that sort until I had a big enough nut to work with.
Don't forget folks
You need to walk before you run. Anyone telling you different is probably trying to sell you a book.
6 Reply
Monique Rene Coates
OP
Consultant · Providence, RI · Member since 2015 · 117 posts · 37 votes
10y
Originally posted by @James Wise:

I would start saving up until I had the down payment. If I did not earn enough money to save I would get another job or do Uber or something of that sort until I had a big enough nut to work with.
Don't forget folks
You need to walk before you run. Anyone telling you different is probably trying to sell you a book.
Thank you for your feedback James. So you wouldn't bring in a JV partner? I could be saving for years. I'm not 20 anymore.
0 Reply
Jordan Williamson
Rental Property Investor · Cape Coral, FL · Member since 2012 · 427 posts · 186 votes
10y
Originally posted by @Monique Rene Coates:

Originally posted by @Jordan Williamson:
Originally posted by @Monique Rene Coates:

@Al Wilson, @Jordan Williamson I actually thought BP was used for networking and finding a JV partners. I have not had a vehicle in almost 3 years, so don't get to go out much to network or REIA meetings etc. Long story.
Thank you both for the advice, I do appreciate it.
Biggerpockets is a great tool to network as well, but it is not the only tool. Networking with locals who know your market and can meet with you in person is a great option.
Agree. For me though, my local market is actually not where I'd like to start investing.
If you don't have a real estate niche picked, a market picked, down payment funds, or experience, you may have a hard time. You should spend some time trying to build your criteria and then find strategic partners to get you there. As @james wise said you need to walk before you run. In this case by walking I mean putting some time into building criteria and relationships
0 Reply
Monique Rene Coates
OP
Consultant · Providence, RI · Member since 2015 · 117 posts · 37 votes
10y
Originally posted by @Monique Rene Coates:

If you had POF for up to $500k but NO down payment funding from any sources = IRA, Family, Bank Loans, Credit or Income . . .
What would YOU DO to purchase a BUY & HOLD commercial 10 - 12 unit investment property for CASH FLOW with a Min. Cap Rate of 8%, ROI > 70% and vacancy rate < 5% annually.
Thank you for any help BP Friends!
Hmmmm . . . Per above . . I have a niche, I do have a market (in mind), I just have no down . . .
0 Reply
James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
10y
Originally posted by @Monique Rene Coates:

Originally posted by @James Wise:
I would start saving up until I had the down payment. If I did not earn enough money to save I would get another job or do Uber or something of that sort until I had a big enough nut to work with.
Don't forget folks
You need to walk before you run. Anyone telling you different is probably trying to sell you a book.
Thank you for your feedback James. So you wouldn't bring in a JV partner? I could be saving for years. I'm not 20 anymore.
I suppose bringing in a partner is another option but that leads to a whole new set of questions.
What value can you bring to the transaction?
Every partnership needs 3 things.
1. Money.
2. Experience/Infrastructure.
3. Credit.
Assuming you are not bringing 1 & 2 to the deal as it sounds as though this will be one of your first deals you need to ask if 3 alone would be enough to get someone to want to partner with you. If they have 1 odds are good they have 3. The particular financing your talking about sounds to me as a boiler plate offering from a HML hybrid of some sort. I imagine they offer that product with those parameters to the general public.
Hope this does not come off as harsh. I don't want to pop anyone's balloons or anything but I like to give straight and honest advice.
Give this article a read. You may find some helpful tips in there.
5 Things new investors should never do.
2 Reply
Monique Rene Coates
OP
Consultant · Providence, RI · Member since 2015 · 117 posts · 37 votes
10y
I can bring up to $500k POF to the deal = LTV Money
1 Reply
Jordan Williamson
Rental Property Investor · Cape Coral, FL · Member since 2012 · 427 posts · 186 votes
10y
Originally posted by @Monique Rene Coates:

Originally posted by @Monique Rene Coates:
If you had POF for up to $500k but NO down payment funding from any sources = IRA, Family, Bank Loans, Credit or Income . . .
What would YOU DO to purchase a BUY & HOLD commercial 10 - 12 unit investment property for CASH FLOW with a Min. Cap Rate of 8%, ROI > 70% and vacancy rate < 5% annually.
Thank you for any help BP Friends!
Hmmmm . . . Per above . . I have a niche, I do have a market (in mind), I just have no down . . .
Originally posted by @Monique Rene Coates:

I can bring up to $500k POF to the deal = LTV Money
Sorry I could not help more.
JW
1 Reply
Al Wilson
Investor · Daphne, AL · Member since 2014 · 1k+ posts · 242 votes
10y
If you can find a partner in your investment area, that's great. I would not be interested unless you had an attractive deal to bring to the table. Borrowed money is easy to find. Cash is king. I still think your best way forward is to save your money for a down payment and buy a rental or a flip when you have the wherewithal to close a deal. That said, good luck.
1 Reply
Simon Shih
Investor · Houston, TX · Member since 2012 · 354 posts · 186 votes
10y
People on BP will partner with people who have documented experience. At least the ones with money will expect that. A proof of funds letter is not a guarantee. It only gives you a piece of paper that says based on certain things we look at like credit and income, that you could get a loan for 500K. It's a starting point so that you can look for a house or finance a deal. If you don't have the down payment, then there's no way you can get the 500K loan.
I can pay a hard money lender a fee and get a POF so I can give it to someone who needs one before they accept an offer. Doesn't mean I have 500K in the bank or that the lender will lend it to me.
A partner will expect some skin in the game from you. If I have 100K (20% down payment), then I have the credit and the ability to do a deal like that for myself. Why would I need someone who has just credit?
3 Reply
Bob CollettPro Member
Property Manager · Brecksville, OH · Member since 2014 · 486 posts · 464 votes
10y
Monique
Here is a different approach to consider. If you feel strongly that you have a solid commitment for $500k, then why not look for an experienced investor who has a great deal, and some money for a down payment; but can not get it done because he or she does not have the ability to borrow.
So find that investor, and start a bit smaller in the $100k to $200k range, or wherever the median price range is for your target market. Do a couple of these successfully, and people will stand in line to give you money.
Good luck.
2 Reply
Simon Shih
Investor · Houston, TX · Member since 2012 · 354 posts · 186 votes
10y
And just for the record. A commercial loan doesn't look at the borrowers credit. It looks at the property ROI and the ability to come up with a down payment.
1 Reply
James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
10y
Originally posted by @Simon Shih:

And just for the record. A commercial loan doesn't look at the borrowers credit. It looks at the property ROI and the ability to come up with a down payment.
That is not exactly true. The borrow still plays a factor. Not as big of a factor as a residential loan but the borrows credit does come into play.
1 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@Monique Rene Coates its often times the case were you have a cash person who has crappy credit and they line up with a credit partner. Alhtough I would be careful being a credit partner.. as I have seen credit partners get totally hosed and lose it all.
I know the auction houses are getting stickier on these things.. that's why they want 10% of purchase price EM.. which I REALLY like keep those who can find a pay for POF out of the game..
but good luck with it.. I suspect the reality is somewhere in the middle here. Your not getting a normal what I would call POF from a lender in the conventional sense if you have no cash. a lender will want to see that you have cash.. Unless its an FHA loan and you only need 3.5 % cash so 20k but you said you had none.. so that leads me to believe you just have a paid for or wishful thinking POF. @James Wise
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Monique Rene Coates
OP
Consultant · Providence, RI · Member since 2015 · 117 posts · 37 votes
10y
@Simon Shih, @Bob Collett : Thank you for your input and advice, I appreciate it. Just to clarify for everyone, the $500k POF / LTV monies I have access to were purchased thru a seminar last summer.
The funding is private and can be used for various levels of investing, from assignment of contracts, flips up to and including commercial / multifamily RE deals, however we must bring the down payment into the deal in order to access the funding. It was advertised as 100% funding for real estate deals. The only way to cancel after paying was to show them you made at least 3 offers. I had no down payment money and still don't. However if I meet someone who would like to partner, I have this funding available.
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Wayne Brooks
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
10y
@Monique Rene Coates I and others have tried to tell you, in a kind way, that your line of credit/funding you think you have probably does not really exists, and someone has simply misled you. Now that you've revealed you "purchased" this access to funding, I can tell you it Does Not Exist. This is a trap many newbies fall into, being preyed on by those willing to take advantage of you. You will Never meet the requirements (which were likely referred to but certainly not emphasized) to receive this funding, it simply won't happen. I only tell you this to help you not invest emotionally any further in this pursuit, and go further down the rabbit hole before you realize it. You can't "purchase" 90% funding, you have to qualify on income, credit score, property condition, appraisal, etc. Best of luck to you.
7 Reply
James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
10y
Originally posted by @Monique Rene Coates:

@Simon Shih, @Bob Collett : Thank you for your input and advice, I appreciate it. Just to clarify for everyone, the $500k POF / LTV monies I have access to were purchased thru a seminar last summer.
The funding is private and can be used for various levels of investing, from assignment of contracts, flips up to and including commercial / multifamily RE deals, however we must bring the down payment into the deal in order to access the funding. It was advertised as 100% funding for real estate deals. The only way to cancel after paying was to show them you made at least 3 offers. I had no down payment money and still don't. However if I meet someone who would like to partner, I have this funding available.
Unfortunately it is pretty clear that they pulled one over on you. You won't be able to find a partner because there is no value to this financing you have received from the seminar.
I hope you don't take this thread as an attack on you or your character. This thread is probably one of the best things that could have happened. Several members in this thread have a lot of experience in this industry and have given you great advice. That is why newer investors come to this site you can avoid some mistakes by interacting with more experienced investors in the business.
Stay away from those folks at the seminar they are looking to take your money. We are here to give out some credible advice for free.
Real estate is a tough industry. Almost impossible to make money investing if you do not have any money. Anyone telling you different is likely just trying to sell you something. Myself, @Wayne Brooks & @Jay Hinrichs have nothing to sell you.
3 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@Monique Rene Coates nothing to add ... other than we see this all the time in the industry. and its not only guru's who do this although this sounds like a scheme of one particular company.. however many sellers and certainly institutional sellers and companies like Auction dot. com are wise to these ploys.. you must have credible POF's to move forward.
We see this type of program from time to time and the claims are made but every deal you bring them gets turned down for one reason or another.
Then there are lenders who give you approvals that are meaningless but want you to send them 500 or a 1000 for due diligence.. they only make their money taking your small DD payment. Sad but true.
Reality is Real Estate for those with NO cash is a none starter for MOst.. what someone with NO cash should do is go get a RE license and apprentice with a broker and work their way up the food chain. those that are successful in this business are usally those that have made their money at their day job .. saved and now have capital to deploy.
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2 Reply
Roy N.Pro Member
Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
10y
Originally posted by @Simon Shih:
And just for the record. A commercial loan doesn't look at the borrowers credit. It looks at the property ROI and the ability to come up with a down payment.
Simon:
Not entirely true.
While it is true that commercial lenders will evaluate the deal based on the performance of the business (aka. the property). They will also evaluate you as the sponsor/general partner/owner/whatever to ensure you have the experience and the financial stability to not jeopardize the deal ... so your credit and net worth are still important, they are just not necessarily the primary driver.
@Monique Rene Coates
If you have a valid POF for $500K, you would have liquid assets (cash or cash ready instruments) of $500K ... so your downpayment would come from the 500K.
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