Is 100% funding even possible for a new investor?

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Is 100% funding even possible for a new investor?

Zachary Thompson
Member since 2022 · 12 posts · 5 votes

I've looked and looked and fought off scam after scam trying to find the ever elusive, "100% funding" company to partner with as a beginner. I already have a property under contract but do not have funds for a 10%-15% down payment on a loan that will still then leave me 10%-15% short on total cost plus whatever closing costs may be. So I ask you, BiggerPockets pros, does 100% funding actually exist and if so who can get me started with an application today? 

I should add that I am in Ohio

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Jossalyn Wallace
Real Estate Agent · Destin, FL · Member since 2019 · 116 posts · 111 votes
4y

Are you going to be occupying the property? That is going to be the best way for you to get little or no money down. You can go FHA (3.5%) or look into credit unions and see if they offer any first time home buyers programs. If you're buying it as an investment there is likely no way to avoid the downpayment. Purchase as primary and house hack!

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  • Jossalyn Wallace
    Real Estate Agent · Destin, FL · Member since 2019 · 116 posts · 111 votes
    4y

    Are you going to be occupying the property? That is going to be the best way for you to get little or no money down. You can go FHA (3.5%) or look into credit unions and see if they offer any first time home buyers programs. If you're buying it as an investment there is likely no way to avoid the downpayment. Purchase as primary and house hack!

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  • Aaron Byrne
    Lender · Newport Beach, CA · Member since 2021 · 63 posts · 43 votes
    4y

    I agree with Jossalyn. If buying a property as an investment, there is little chance of securing financing at such terms, especially if you are just starting off in the world of real estate. That said, my opinion is formulated based on the professional market and not individual lenders. A HML, bank or other lending institution will want a down payment, but perhaps there is a personal connection in your sphere of influence or a local investor who would be willing to lend you money to buy an investment property with little to no money down. Just be sure to watch out for scams, as you have been doing already.

    Best of luck!

    1Reply
  • Jared Boundy
    Real Estate Broker · Seattle, WA · Member since 2017 · 139 posts · 82 votes
    4y

    Hi @Zachary Thompson. I feel your frustration man. As @Jossalyn Wallace and @Aaron Byrne mentioned, the low down payment options with lenders are mostly reserved for primary residence purchases. In my state there are state grant programs to help with down payments, but I don't know about Ohio. A savvy lender should be able to advise on any programs available. 

    Of course if you can find a property with a seller who doesn't need a chunk of cash up front and is willing to seller finance, then you'd have a no money down deal (though you'd probably still need to cover some closing costs). Good luck!

    2Reply
  • Joseph CacciapagliaBusiness Member
    Lender · San Antonio, TX · Member since 2020 · 1k+ posts · 1k+ votes
    4y

    Unless you're using a VA or USDA loan it's very unlikely you'll find 100% financing from a company. Seller financing and private lenders are most likely your only options. You may be able to add those as a second, behind your bank financing, but many lenders won't allow that.

    That being said, I would not recommend buying with 100% financing as a new investor unless it's an unbelievable deal. No matter how good your due diligence is, there are almost always negative surprises. Real Estate investing should be approached from a position of financial strength, IMHO. If you don't have the funds for a down payment, it may make sense to bring in a well capitalized partner.

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  • Zachary Thompson
    OP
    Member since 2022 · 12 posts · 5 votes
    4y
    Quote from @Jared Boundy:

    Hi @Zachary Thompson. I feel your frustration man. As @Jossalyn Wallace and @Aaron Byrne mentioned, the low down payment options with lenders are mostly reserved for primary residence purchases. In my state there are state grant programs to help with down payments, but I don't know about Ohio. A savvy lender should be able to advise on any programs available. 

    Of course if you can find a property with a seller who doesn't need a chunk of cash up front and is willing to seller finance, then you'd have a no money down deal (though you'd probably still need to cover some closing costs). Good luck!

     Thanks everyone for the quick replies. I am looking at it as a short term investment. Fix and flip. But to touch on what @Jared Boundy said, I have it under contract subject to the existing mortgage. So to actually purchase the property it is a very cheap price that I could manage easily. The issue I have if I go that route is I wouldn't be able to find funding for the rehab portion of the project as there is an existing lien holder in 1st position. Maybe if someone knew of a lender for a large rehab project that didn't require a large down payment or 1st lien holder position on the property I could make that work.

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  • Jared Boundy
    Real Estate Broker · Seattle, WA · Member since 2017 · 139 posts · 82 votes
    4y

    That's an interesting situation @Zachary Thompson. Maybe it would work better to just wholesale it by finding another buyer/partner to take over the purchase and pay you an assignment fee. What you're really looking for is a private lender (which could be a partner), not an institutional lender. If you don't know anyone in a position to help you with the purchase, I'd try to take it to a local meetup and see if anyone is interested.

    3Reply
  • Miranda Holland
    Lender · Macon, GA · Member since 2015 · 191 posts · 59 votes
    4y
    Quote from @Zachary Thompson:

    I've looked and looked and fought off scam after scam trying to find the ever elusive, "100% funding" company to partner with as a beginner. I already have a property under contract but do not have funds for a 10%-15% down payment on a loan that will still then leave me 10%-15% short on total cost plus whatever closing costs may be. So I ask you, BiggerPockets pros, does 100% funding actually exist and if so who can get me started with an application today? 

    I should add that I am in Ohio

    You might have to be a little creative about your financing to cover the down payment. I'll shoot you a DM 

    1Reply
  • Jonathan Taylor
    Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
    4y

    @Zachary Thompson Some good answers to your question but @Joseph Cacciapaglia hit the nail on the head. We were all new and if you don't have the financing strength to buy, you are putting yourself at immense risk as a newbie. Number one rule is don't run out of money. So as enticing as 100% financing is, it is immensely unrealistic. I have only seen it done by experienced professionals on niche and unicorn deals. Keep at it but rely on realistic expectations. 

    2Reply
  • Zachary Thompson
    OP
    Member since 2022 · 12 posts · 5 votes
    4y

    @Jared Boundy @Jonathan Taylor  Thank you both for your input. It's much appreciated and duly noted! I'm meeting Thursday with 2 potential investors/partners to see what we can come up with. May not be the homerun deal I anticipated as Jonathan mentioned but I should be able to secure a decent wholesale fee.

    1Reply
  • Jonathan Taylor
    Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
    4y

    @Zachary Thompson keep at it but be conservative in this market. You're welcome for the info.

    0Reply
  • Chris Webb
    Investor · Central Virginia · Member since 2020 · 394 posts · 253 votes
    4y

    What often gets lost in 100% funding is time. Yes, it does exist, but in time. 

    2Reply
  • Dave Skow
    Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes
    4y

    @Zachary Thompson1) there is no such thing as 100% financing for a STR ...2) you will likely need a 15% or more down payment

    1Reply
  • Lyndsay Zwirlein
    Lender · Member since 2020 · 331 posts · 209 votes
    4y
    Quote from @Zachary Thompson:

    I've looked and looked and fought off scam after scam trying to find the ever elusive, "100% funding" company to partner with as a beginner. I already have a property under contract but do not have funds for a 10%-15% down payment on a loan that will still then leave me 10%-15% short on total cost plus whatever closing costs may be. So I ask you, BiggerPockets pros, does 100% funding actually exist and if so who can get me started with an application today? 

    I should add that I am in Ohio


    There are DSCR programs that do not source funds and others that allow 100% gift funds. If you can find a HML, private lender, etc you could effectively put $0 down.

    3Reply
  • Mark Welch
    Member since 2019 · 19 posts · 9 votes
    4y

    If you are a first time investor and first time home buyer (first time home buyer, meaning you have not had ownership in real property within the past 36 months), it is possible to purchase a 2-4 unit property and use it as your personal residence/investment. Bank of America recently launched a 100% first time home buyer product.

    1Reply
  • Alex BreshearsBusiness Member
    Lender · Springfield, MO · Member since 2020 · 354 posts · 504 votes
    4y

    Hi Zachary!

    What you are experiencing is all too common. The most common scam in lending (and private lending specifically!), is the 100% financing for investment property. What I want to make clear is that there COULD be ways to buy investment property with "no money down", but you will still need capital.

    So first, let's consider just buying an investment property purchase straight up with 100% financing. This is actually a risk to both the borrower and the lender. Think about this economic environment. In the 1-4 unit space, the "value" is evaluated based on home sales in the past several months within a certain radius of that home. With increasing interest rates, the values of properties are going DOWN in multiple markets across the US with more anticipated going into 2023.  So here is the problem, 100% financing today means 105% or 110% or worse next year. This LOCKS you into the loan because you will have to bring cash to closing just to sell it, or the lender would have to take a hair cut just to get it off their books. Neither is an ideal situation.  Also - a borrower that doesn't have enough capital to close a loan, or none of their own capital, is the highest risk borrower for default.  Lenders are not in the business of owning properties, otherwise they would have used their cash to buy the properties in the first place. Zillow and other ibuyer types are getting crushed under the inventory they currently own losing value for this very reason.  

    Now what could be possible for "100% financing" is that if you have the property under contract at a deep discount and then renovation costs plus the purchase price are less than 70% of the after repair value.  Even in this case, many lenders right now are going to do a 10% down of purchase price (or more) with the lending environment currently out there. THis also doesn't include paying for closing costs on either option. Even if you found a lender that would do 100% financing on a deeply discounted property, they likely will also hold the renovation money in escrow, which requires you to start some level of renovations, complete them, provide documentation that is is complete and paid, and then get reimbursed for that money outlay.

    So you can see you are asking for something that is difficult on so many fronts. I'm not saying what you are looking for doesn't exist, I'm just expressing that you may have to talk to A LOT of lenders to find one, and if the property isn't deeply discounted, 100% doesn't exist for investment property period.

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  • Eliott Elias
    Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
    4y

    Borrow that money from a private money lender, a friend, or the seller 

    100% financing absolutely exists, hard money and private money people want to make money at the end of the day and sell off their loans. If you can give them a good enough deal they're all ears 

    1Reply
  • John Myers
    Realtor · Albuquerque, NM · Member since 2014 · 109 posts · 79 votes
    4y

    New Mexico has a first time home buyers loan that allows you to buy a home for as little as $500.  There are may restrictions and in Albuquerque there is no way (because of the price of homes) to buy a home for $500.  This is only for New Mexico residents.  You may want to see if Ohio offers something similar.  This program is only for owner occupied.

    1Reply
  • Alicia ProkosPro Member
    Developer · Powell, OH · Member since 2016 · 61 posts · 44 votes
    4y

    It's already been said, but I would look for seller financing. I know that doesn't help you with your current situation, but wholesaling the deal is a start. If you establish a rapport with the seller, and he or she is not in immediate need of the money, you may be surprised the generous terms you can get. Like 0% interest!

    1Reply
  • Brady Hales
    Rental Property Investor · Provo, UT · Member since 2021 · 46 posts · 50 votes
    4y

    @Zachary Thompson if you are looking to learn ways of 100% financing check out the Pace Morby youtube channel. He teaches creative finance and there are definitely ways to do it but kind of just depends on what you want to do.

    In this case you could use a hard money lender and bring a private money investor in for the 10%-20% down payment. The private money lender can be secured with a note and deed of trust. You can also create a multiple owner LLC, you can also create JV agreements. There are a lot of ways to do it but you have to make sure the deal works and be willing to go find private money lenders.

    4Reply
  • Cedric L Henry
    Investor · Member since 2019 · 7 posts · 10 votes
    4y

    @Zachary Thompson my thoughts are unless you found a really great deal price wise it doesn't matter if you find 100% financing. What's important is the cost for you to play. Hard money lenders charge more than banks, so that's an added cost to your bottom line. Factor in the unknown cost of rehab and you could be sitting on a huge liability instead of an asset. Do you see where I'm going with this. At times it's the deal that dictates the financing, and if it is good people will want in. I would need more information about your situation, but as a few have mentioned I would strongly look at FHA 3-5 % down and house hack to get started. Believe me it works!

    Good Luck!

    Cedtech Group

    2Reply
  • Wale LawalBusiness Member
    Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
    4y

    @Zachary Thompson

    There are many investment deals that transpire throughout the real estate market every year. Most of them are achieved through traditional lenders and institutions like banks, but some are accomplished through less traditional means. In most cases, it’s because the investor couldn’t raise the capital or didn’t have the credit score to do so. Here are 11 ways to invest in real estate with no money:

    1. Hard Money Lenders
    2. Private Money Lenders
    3. Wholesaling
    4. Equity Partnerships
    5. Home Equity
    6. Option To Buy
    7. Seller Financing
    8. House Hacking
    9. Government Loans
    10. Microloans
    11. REITs

    Read this article for more information https://www.fortunebuilders.co...

    Good luck!

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  • Mike Klarman
    Specialist · NJ · Member since 2022 · 1k+ posts · 653 votes
    4y

    If it was, wouldn't life be great?

    You need 30+ projects completed in three year span to get 100% financing.

    0Reply
  • Matthew Gaddis
    Member since 2022 · 22 posts · 5 votes
    4y

    There are some creative options out there, but none of them are truly 100% financing.

    I would recommend looking at a Down Payment Assistance program in conjunction with FHA financing. Something that is at least 3.5% should cover the down payment. Either find a local or national program that follows FHA guidelines and will allow you to purchase up to 4 units.

    You will have to live in one of the units, but you can rent out the other 3 and create passive income.
     

    0Reply
  • Remington LymanBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
    4y
    Quote from @Zachary Thompson:

    I've looked and looked and fought off scam after scam trying to find the ever elusive, "100% funding" company to partner with as a beginner. I already have a property under contract but do not have funds for a 10%-15% down payment on a loan that will still then leave me 10%-15% short on total cost plus whatever closing costs may be. So I ask you, BiggerPockets pros, does 100% funding actually exist and if so who can get me started with an application today? 

    I should add that I am in Ohio


    You should probably get a money partner and a hard money loan

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