Hello, I'm working towards purchasing my 1st investment property, but I don't want to use any of my own money. (which is not much) I've seen the different types of funding out there and was wondering if anyone with experience using any type of funding could answer questions for me?
There's a HUD home in my little ole city of rocky mount nc for sale for $36,500 in a B neighborhood not too far from a nice country club and golf course. Tax office accesses it at around $112,400. Would I have to have a contract, or however that works with hud, on the house in order to apply for any funding to purchase? Can anyone tell me how that process would work for funding not just with a hud home but with any home that the numbers show that it would be a good deal? Thanks in advance
@Chris Purvis - Every broker I deal with (I represent buyers in a brokerage) require a pre-qualification letter to be submitted with all offers, and some require a proof of funds as well. But never once have I had a deal where a lender qualification or proof of cash was not required. My suggestion would be to get qualified with your local bank first
@Brie Schmidt Thanks. Do any of your buyers come to the table with funding from hard money lenders, private lenders, crowdfunding loans or anything like those? If I were pre-approved by a hard money lender (for example) and they say they can close my loan in 7 days, does that mean I can go to close on a property in 7 days? Also at the closing on a property would I be closing as a cash buyer or will the hard money loan be recorded as my mortgage?
Yes people close with private lenders and hard money lenders all the time. Investor to investor deals, like most of my deals, the seller won't care where the money comes from they just want to know you can close and will keep your deposit if you don't.
On listed properties you may be able to get a financing contingency. But that is not as strong an offer as cash or with no contingency.
Lots of gurus talk about closing fast like 7 days. I sell lots of properties and have never had one course that fast. In my area you can't even get title work done that fast.
Yes a hard money loan will have a recorded mortgage.
Thanks @Ned Carey Since hard money loans are recorded as a mortgage, does that mean I will have to have a property under contract to purchase (basically the same closing process as with a conventional)?
@Chris Purvis even if a HML was not recorded you would still need a contract and you would use a title company and a traditional settlement.
@Chris Purvis They don't care where the money comes from, just that you have it. Not all REO properties can move quickly. I have clients just go under contract for a Homepath property and they wrote a closing date of 2/11 on the contract and they countered with 3/2 to give them time to do what they need.
As far as a HML to buy the house....how are you going to pay them back? How are you going to pay the points and portion of your loan? At 4-6 upfront points and usually 70% of ARV they still want you to have money in it. You will also need some sort of track record or partner that does for a HML
When you're starting out in this business, your first deal has to be a home run. It's like gaining entry to the players club. Once you have a great deal, the rest should fall into place. Post it here without giving the address and if it's good, you will get offers.
Your best starting point to find the kind of funding you're looking for is the local REIA.
Best of luck with it.
Thank you all for your input. @Brie Schmidt I did consider the HML requirements for skin in the game. So with that being the case my plan was to borrow money from my 401k to get started. I've come to understand since I've been on BP that things seem to go quicker having your own money. I just don't want to tie of all of my money in favor of using other peoples money instead. To pay the HML back I would immediately resell the property for a small profit to another investor in my area. Wholesaling for me hasn't gone anywhere in this small area, so I figured being a buyer myself would be a better option to get going in real estate investing. I just don't believe that me not having money should be a hold up to doing something to move me towards my real estate goals.
@Ned Carey thanks for clarifying that for me. The dots are slowly but surely being connected. I appreciate it.
@David T. Thanks. BP is the 1st place I'll post as soon as I get a deal.
I went to my 1st reia meeting Saturday morning in Chesapeake Va. I live and will be investing NC and understand that the laws are different here than in Va, but I enjoyed the experience and learned a lot.
@Chris Purvis You should be careful about buying hud homes. Make sure you do a proper inspection and if you are new, you may want to bring in an experienced partner. Cheap does not mean profitable. The process of no money down is not complicated. If the value is there, the hard money lender will finance the deal plus rehab money. You may even have cash back at close of escrow.
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