100% Financing for Investors, Myth or Reality?

21 Replies

It's amazing to me how many requests I get from investors everyday looking for 100% financing for their fix and flip deals and more.  Now what is even more amazing to me is how many lenders and brokers promote their 100% programs knowing most investors will never qualify.  But that is from my experience and I am an account executive with a great commercial broker in this industry.  

I would love to hear about your experience and thoughts on the 100% financing for real estate investors.  Please post away. 

Well, my situation is unique in that my franchiser, HomeVestors, does loan us money with $0 down. Because of this I have been able to develop a pretty nice rental portfolio with almost none of my own money invested.  I used HVAs money to purchase and fix, then put a tenant in place, and refinanced them off with a local bank.  

That said, I agree with you that outside of this unique situation there are very few lenders who will lend at zero money down.  And why would they? If a person isn’t willing to put some skin in the game, why should the lender risk their cash?  And if a person isn’t able to put some skin in the game, how confident can the lender be that they person is a competent investor.  I know I woulnd’t. 

@David Wright You're correct my friend. The reality of it is that 100% financing does exist, and it's out there in a number of situations - often this will be seen in local communities with a local investor who also lends money on investment properties in his immediate area because he knows the market and can crunch the numbers. Additionally, there are a handful on national lenders who "market" 100% financing but as you said, criteria is very very high, i.e. 10+ flips in past 12 months, must pledge their own primary residence as collateral, and rates are still often high, and you may still also have to have 6 months reserves. I always encourage some of our own borrowers (who don't meet some of these criteria), that you're still much, much better off just bringing 10-20% down even if you have 700+ FICO, high liquidity, heavy experience etc because we can place them with much better rates and terms elsewhere, just at a lower LTV.

@Patti Robertson I am familiar with Homevestors but was not aware that they offered 0% down financing - very cool!! I would imagine there are other organizations that also offer structures like this for their members!

@David Wright

I'm also a HomeVestors franchisee so I have the same opportunities (and use them) that @Patti Robertson has!

And I'm partner in a hard money lending company headquartered in Dallas. We absolutely do a ton of loans all up and down the east coast with no money down funding up to 70% ARV. The main requirement is that someone shows us credit score, some liquid funds and some rehab experience, but we also loan to new investors if they can show a bit more liquidity and for 1 extra point in fees.

And we are not alone. It's true - this type of lending is out there, hopefully it's legit (ours certainly is), and Wall Street investors are loving throwing money at this type of investment. Win/win/win.

@David Wright If it’s a low price point under 50k . You can simply use a line of credit with none of your own money then get a good tenant payIng everythIng and just refinance at a lower Interest later paying off the credit line and putting cash in your pocket . obviously that’s not going to work in many cases though but is one way

My experience has been that there are several lenders who offer 100% financing, but as you mention, you still have to meet all of their criteria: minimum credit scores of 640+, a minimum amount of liquidity verified ($15,000+), and the deal has to make sense (exit strategies, ARV, appraisals, etc. And most importantly, the total loan package INCLUDING rehab budget, cannot exceed 65%-70%. I'm doing two of these projects now.

Originally posted by @Jeremy Rotert :

My experience has been that there are several lenders who offer 100% financing, but as you mention, you still have to meet all of their criteria: minimum credit scores of 640+, a minimum amount of liquidity verified ($15,000+), and the deal has to make sense (exit strategies, ARV, appraisals, etc. And most importantly, the total loan package INCLUDING rehab budget, cannot exceed 65%-70%. I'm doing two of these projects now.

 these are for fix and flip... or refi..  not to buy rentals.. right ?

@David Wright @David Wright Anything is possible. I have 6 flips in various stages at the moment and for the first time ever I am using a construction loan to purchase a home next week as I’ve run out of existing funds with so much going on. Here are the details: 65% of ARV upfront 3/4 of a point 6% Interest only No prepayment penalty

I bought a rental triplex with one this week.  with a small $5k rehab budget to satisfy the requirement.  It's fully rented at $1800/mo total rents. I will refi out in 90-120 days, but preserve cash in the short term for other deals.

Originally posted by @David Wright :

It's amazing to me how many requests I get from investors everyday looking for 100% financing for their fix and flip deals and more.  Now what is even more amazing to me is how many lenders and brokers promote their 100% programs knowing most investors will never qualify.  But that is from my experience and I am an account executive with a great commercial broker in this industry.  

I would love to hear about your experience and thoughts on the 100% financing for real estate investors.  Please post away. 

No harm in asking if you will bend your rules just this one time and give an investor 100% financing especially when they have no experience, no track record but a ton of heart and grit. 

C'mon! Don't be heartless - show some love! ;)