Hi BP. I found a duplex for $75k that I really like, and the numbers work out perfectly, but there's just one problem... I am a college student with no income, so the banks won't give me the time of day, and it would be hard to refi out of a hard money loan with no income. I really want to buy and hold this one rather than wholesale it, do I have any options?
I've thought about partnering, and I found a partner who was willing to put the $15,000 down, but he wants to know where the debt and security was coming from. Is it smart to get a hard money loan? Will I be able to refi out of it? Can my partner do anything to help me while still splitting the deal ? (He has money)
I guess the ultimate question here is, I want to buy and hold this duplex... What are my options?
You would need someone with good credit and the money to co sign the loan
As Caleb said, you would need a co-signer for the loan. If your potential partner will fill that role, it makes the partnership more valuable to you.
In regards to "is it smart to get a hard money loan", if the numbers make sense you and don't have better options. Hard money loans are not cheap, so if you are able to get the money from another source that is smarter. If you are not able to get the money cheaper, and even at the hard money rates (under a pessimistic scenario where everything is over budget and takes twice as long as you expect) make sense, it is a smart decision.
You also said that you have no income, but you are a wholesaler. If you have been actively wholesaling, you have income even if its not W-2 income. Banks simply want to see that you have a history of self-employment income (generally 2 years) in those cases, but shopping around you might find a community bank willing to bet on you.
From the unconventional side of the house...I have bought several owner-carry properties (am rehabbing one now), and I have sold on a lease option a couple of times.
1. You could ask the owner to finance for you. You make arrangements with the seller for them to be the bank for you. I have had my title company set the numbers up, and handle the deed and the payments, plus the tax paperwork at the end of the year.
2. You could ask if they would be willing to allow you to rent to own, where you give a down payment and they increase the rent a bit to increase their profit on the deal and at the same time increase the amount of the equity you gain. At some time in the future that you both agree upon (2-5 years) you can either refinance with a bank loan or decide that you aren’t going to buy, so you walk away from your equity and your down payment.
3. Wait. Save up, take an extra job, work for the down payment funds. This deal will likely pass by in this time, but another one will be out there.
You mentioned hard money... does this mean the property needs some work? How much do you think the work will cost?
There are commercial lenders that will do the refinance for you, usually in an LLC. Some of them don't care about income at all, as long as the asset has good cashflow.
Do you have any reccomendations for lenders who don't look at income? Keep in mind that this is a duplex so it would not be considered a commercial property.
The term commercial might be misleading; it could mean either the property type or a business intent. I'll message you about the lenders.
Find a partner if the deal is as good as you say it shouldn't be too difficult. Remember, 20% of a great deal is better than 100% of the deal you have now. Also ask the seller to carry a note, never hurts to ask.