Best Way to Finance Off Market Deals

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Best Way to Finance Off Market Deals

Allison Christine
Member since 2018 · 7 posts · 1 vote

Happy Monday BP Community! 

I am sooo excited to be getting closer to making my first deal. I am targeting SFH or duplexes (house hack) ideally to BRRRR.
In my market, MLS properties are flying off market over asking price. I have been diligently driving for dollars, noting properties to target and compiling my cold call list.

My question is, because I am searching for an off-market property, what type of financing would be best? When I make the owners an offer, do I need the leverage of having hard money?? Because I am a first time buyer, I was planning to use the FHA loan for the low down payment, but am concerned with that approach when not using a realtor and the MLS.

I also have a family member willing to lend me 30k of there 401K but hesitant to accept. I have 20K saved up to MAKE A MOVE.

Thoughts??? Thanks all!!!

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  • Ryan BlakePro Member
    Lender · TX · Member since 2018 · 936 posts · 713 votes
    6y

    @Allison Christine Great questions here.

    First off, not sure if the $20k will be enough or not. It really depends on the area and grade of home your are looking for. If you are looking for a duplex in an A class neighborhood, it may not be enough even in the cheapest markets. It will also depend on the reserves your lender may want to see. I am always wary of borrowing money out of a family member or friends 401k. That can go wrong in many ways.

    As for Hard Money vs FHA. Hard money offers will almost always look more attractive in that they are same as cash financing and can close quick without required inspections and the like. The downside for househacking, hard money lenders are NOT allowed to lend to owner occupied homes because they do not confirm to Dodd/Frank lending laws. Most lenders will make you buy in an LLC so that it is not officially owner occupied no matter what but will make it a little more difficult to do a refi into long term debt or they will make you buy in your name but sign an affidavit that you will not occupy the home. FHA loans will fund some rehab amounts but mostly cosmetic rehabs. If there are structural issues, it will be VERY difficult to close in an FHA loan. It does allow you to get into the loan with just 3.5% down which is very nice and has a low interest rate right off the bat.

    Good luck with this search. I hope my thoughts help a little.

    [email protected]214-420-7324
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  • Allison Christine
    OP
    Member since 2018 · 7 posts · 1 vote
    6y

    Thank you Ryan!! I was not aware that I couldn't house hack with a HML, but that makes sense! I guess its all going to depend on the property, which type of financing is the best. Thank you very much for taking the time to help me untagle this! There is soooo much to consider, it can be overwhelming as I am trying to put together my plan. If I go after an off market property in need of a lot of repair, and don't house hack, I will propbably try to do HML. If I go after a nicer property in less need of fixes, seems FHA will be my best bet. It will all come down to the numbers. And, yes, ideally having more than 20k to start!!

    Thank you, again!

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  • Andrew BravoPro Member
    Dalton, GA · Member since 2020 · 21 posts · 7 votes
    5y

    @Allison Christine

    Hi Allison, it’s funny this post is from 2020, almost a year later and I’m in the same boat lol the mls deals in my market is pretty much dry for multi family. Just wanted to follow up with you, have you done your first deal yet? And if so, did you figure out if you could finance an off market deal with financing through a bank ?

    Any information helps as I am a newbie still iso my first rental property also looking to house hack !

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