Best way to finance a Buy & Hold?

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Best way to finance a Buy & Hold?

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Rental Property Investor · Bakersfield CA · Member since 2018 · 10 posts · 4 votes

Hi all,

REI newbie here. Been lurking for a few weeks and establishing a plan to get my portfolio going with Buy and Hold investments, but had a question regarding financing a 4 Plex without rehab.

Let's say I'm looking at a 4 Plex that I want to owner occupy for at least two years. Asking price of said property is $399,000. Now if I were to put ten percent down with traditional financing, I'd need about 40k not including closing costs. But let's say I don't plan to rehab it at all, then what are my options for financing with hard money lenders and putting no money down? Would I go about trying to get the property for let's say 350k, and refinance at previous asking price  of 399k to pay the hard money back?

I guess what I'm specifically asking is, if there's no where I think I would need to add value into the property, would I try to get the property at as low a price as possible, have a HML fund the purchase, and then just refinance at a good value to pay them back? Would that make sense to Lenders, or am I blowing smoke?

Still learning the inside and outs, so thanks again for all the help everyone!

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  • Keith Gilbert
    New England · Member since 2018 · 43 posts · 21 votes
    7y
    @Mario Morales Hi! My first suggestion would be to start looking for a local lender you can build a relationship with as that will help in the long run. On the current question, keep in mind that banks would be looking at a 70-80LTV on a refinance for that property. Add the fact you’re going to pay for the hard money and then still have the refinance fees, you’re likely better off talking to a bank about loan options. Seems like a low down payment house hack might be a better fit in this case.
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  • Caleb Jordan
    Lender · Arlington, TX · Member since 2018 · 465 posts · 184 votes
    7y

    First A hard money lender will not fund an owner occupied property. 

    Then it will be difficult to find someone who will do 100% if you don't have a lot of experience.

    If you could aquire a property with hard money then you can do a refi later down the road.

    you could also see if a hard money lender might have a mid to long term loan for the purchase if your goal is to just get cash flow and you're not looking for a cash out refi right away.

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    Rental Property Investor · Bakersfield CA · Member since 2018 · 10 posts · 4 votes
    7y

    Thanks for the replies guys, I'm looking into building relationships with local lenders now, but was curious to see what other finance options are possible. 

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