Preparing for a second property

11 Replies

Hello BiggerPocketeers! 

I was in the works of acquiring a second multi family property through a creative way of financing it. First, the seller (relative) would have held the note for 20% for 24 months while I acquired a hard money loan for the rest. The numbers would have worked out that way, I would refinance and payback the note and the hard money loan. However, the hard money investor backed out due to "not having skin in the game". 

Any advice on what happened here? I thought that if I had the 20%, there wouldn't be any issues. 

Thanks in advance!

It's because you dont actually have your own money in the deal and you were financing 100%. Some lenders will allow that and a lot wont. Can you not get a traditional loan on it? If the numbers look good for HML it should be ok for traditional since their rates would be much more reasonable.

Are you going the Hard Money route due to the amount of repairs? The reason they backed out makes perfect sense; they are protecting themselves from excessive risk. You could leave everyone hanging when it gets tough and their money is on the line.

With all that being said, you will be able to find a HML to close on a deal like this. They are all different and it will require some networking/calling around. They will want to see a certain amount in reserves as well.

@Jonathan Martinez essentially if the seller is putting up the 20% by holding the note, you have no skin in the game. The only way to get over this is to partner up with a private individual who can bring that 20% to the table plus whatever else you will need to close the deal

Originally posted by @Jonathan Martinez :

Hello BiggerPocketeers! 

I was in the works of acquiring a second multi family property through a creative way of financing it. First, the seller (relative) would have held the note for 20% for 24 months while I acquired a hard money loan for the rest. The numbers would have worked out that way, I would refinance and payback the note and the hard money loan. However, the hard money investor backed out due to "not having skin in the game". 

Any advice on what happened here? I thought that if I had the 20%, there wouldn't be any issues. 

Thanks in advance!

 Most hard money lenders don't like seller financing in combination with their loan because then someone else has lien on property. You looking for a lender that allows 2nd lien

Then secondly no skin in the game as already mentioned.