want 25% down conventional loans but sellers want cash..... help!

13 Replies

hey guys and gals, I am new to the site and I need some help. I have say 100k in cash. I am looking to buy and hold houses and rent them long term. All the turn key houses I am looking for are 30-55k. The sellers all want cash and do not want to wait for me to get loans. I want to spread my cash instead of it being held up in 2-3 houses. I meet all requirements for loans. 25% down, money in the bank, stellar credit etc etc. Is there any ways to be pre-approved for the cash deals like this? I am new to the REI game. Looking for any and all help. I want to acquire my 12 this year. Thank you in advance for your time and help. I am looking to learn alot from the site and maybe even be asset to others down the road.

Can’t u get a proof of funds off line ?then have them money on closing?

any other options? will lenders work to pre approve me and close in short term periods with all our ducks in a row?

We did a pre-approval with 40% down on a $420k single family.. we closed it in two weeks

Our second purchase for an investment property took 21 days for the same price and down payment as the first. 

Our third purchase with 40% down for a $470k duplex stretched to 35 days.. when it was originally suppose to take 21 days

I believe the what affected our times were the property appraisals, inspection reports, and whether or not the property is yours to live in or an investment property. 

To clarify: are you looking at turnkey SFRs going for $30k-$55k around you - where you can touch them - or somewhere else?

1. I know that you can buy properties in Jacksonville for less than $30k, but can’t imagine a real turnkey house going for that unless it’s in an extremely bad area of Jacksonville (even then I think it’s a stretch - but I don’t know all of Jacksonville.) If you may just be starting out, I’d absolutely advise against bad areas.

2. With the above in mind, I wonder if the seller’s desire for cash is not really an attempt to avoid a (lender-required)n appraisal, as well as also potentially swaying you away from getting an inspection. (I don’t know why I see potential liars everywhere - it’s either mental or much experience I’ve actually had with the issue. Hint: I’m going with the latter.)

3. While all of the above may be true, there are few conventional lenders that have the desire to do a loan for under $50k to begin with, so at 25% down, your purchase price should be over $60k just to get there. If I were the seller, I’d want you to have a pre-approval letter within days, not just a pre-qualification - unless you are buying with all cash (then proof of funds, which should be very easy for you to obtain.) In a hot market, I may not even consider your finance offer.

Those who wrote above are correct, including @Russell Brazil. Just make sure that you know all the facts about the properties you are buying. I’ve seen the term “turnkey” mean too many things, including needing new roofs, leaky sewer mains, etc. And some of these sellers/agents are on this site (not in this thread - at least yet.)

yes they are on outskirts of bad areas, but these bad areas are in the middle of planned city growth hence my interest. houses are rehabbed. ill have inspection regardless of loan or not.

Originally posted by @Al D. :

To clarify: are you looking at turnkey SFRs going for $30k-$55k around you - where you can touch them - or somewhere else?

1. I know that you can buy properties in Jacksonville for less than $30k, but can’t imagine a real turnkey house going for that unless it’s in an extremely bad area of Jacksonville (even then I think it’s a stretch - but I don’t know all of Jacksonville.) If you may just be starting out, I’d absolutely advise against bad areas.

2. With the above in mind, I wonder if the seller’s desire for cash is not really an attempt to avoid a (lender-required)n appraisal, as well as also potentially swaying you away from getting an inspection. (I don’t know why I see potential liars everywhere - it’s either mental or much experience I’ve actually had with the issue. Hint: I’m going with the latter.)

3. While all of the above may be true, there are few conventional lenders that have the desire to do a loan for under $50k to begin with, so at 25% down, your purchase price should be over $60k just to get there. If I were the seller, I’d want you to have a pre-approval letter within days, not just a pre-qualification - unless you are buying with all cash (then proof of funds, which should be very easy for you to obtain.) In a hot market, I may not even consider your finance offer.

Those who wrote above are correct, including @Russell Brazil. Just make sure that you know all the facts about the properties you are buying. I’ve seen the term “turnkey” mean too many things, including needing new roofs, leaky sewer mains, etc. And some of these sellers/agents are on this site (not in this thread - at least yet.)

 is there another lending program you would reccomend?

If conventional or conforming is not available, there are of course hard money lenders.

Your local banks and credit unions should be your first stops to get conventional stuff. If under $50k is not unusual for your market, you should be able find a bank, may just take time knocking on doors. While you are talking to the local institutions, inquire about their portfolio loans (sometimes you may have to have certain minimums that you’d have to keep deposited/invested through the bank.)

Same thing if you should go with @Russell Brazil’s suggestion, make sure that you have a lender lined up for that ahead of time.

aweome info Guys, keep it coming....

Sorry, I just realized that I used the term "portfolio loan" out of place. I misspoke.

As described in my previous post, I meant something along the lines of "private client" loans, where the bank would set its own qualification standards, independent of Fannie or Freddie guidelines.

But, if you should be buying multiple properties at once, or may have existing properties that you may be looking to refinance along with the purchase(s), you should also ask each bank/CU about portfolio loans.

@Nathan Stuart , I would anticipate major problems with finding financing for $35-55k homes.  After transitioning into a job in the financing world, I have completly changed my strategy when it comes to these lower price SFRs.  I will only pursue a property with at least $75k debt as this keeps almost all exit strategies on the table.  You are always going to have a LOT of difficulty with financing the up front or on the back end with a refi on a $35K property.  You are also going to be limiting yourself to a smaller pool of buyers as you are finding out... your seller only wants to deal with cash.  My guess is because he/she has learned what I have leard about debt on these type of properties. 

If you can find a bank that will finance these properties, you will probably be paying higher transaction fees relative to loan amount which at these prices will SIGNIFIGANTLY decrease your COC returns.

@Nathan Stuart Finding loans under 50k is very very difficult. Getting more than 10 loans under 50k probably is impossible. This person https://www.biggerpockets.com/users/JerryPadilla#0

has said he can do sub 50k loans in the past. 

sub 30k homes are in the worst school districts. look up the address on zillow and see the school score of 1 or 2. You might condsider buying homes at 65k and buy 7 of those types of homes then with the extra monthly cash pay down one loan as fast as possible until it is paid off. 

Gordon Cuffe, Lender in CA (#1037464)
916-261-2381

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Join the Largest Real Estate Investing Community

Basic membership is free, forever.