Relationship Lending, 100% financing, and direct lending. Do these deals happen?

[Michael Wolfe]

I am an entrepreneur that has spent the past 2 years studying real estate investing and started my business in July. I have heard of  "relationship lending" and private lenders that work directly with investors with the possibility of 100% financing. All I have found in my search has been scammers and 80-90% lenders. 

Does 100% financing from lenders exist? If so, is there a recommended way to find these lenders and pitch deals to them?

[Doug Smith]

Hi Michael, Study's have shown that the default rate on 100% financing deals is astronomically high. "Skin in the game" is, as good lenders know well, critical in reducing risk to lenders. The only people that offer 100% financing on non-owner-occupied properties these days are 1) scammers and 2) rookie lenders that have never been through a downturn and don't know better. Others can chime in and disagree if they wish, but chances are those that will argue will fall into one of those two categories. "Relationship Lending" doesn't mean that the lender has abandoned solid, proven underwriting principles. It simply means that a rapport is being built and that the lender, now that they know more about the borrower and their operational competence, might be a bit more aggressive. That doesn't mean that the lender will throw caution to the wind and finance anything that the borrower throws at them. Good lenders will still need to understand 1) Character (aka credit...which is part of the relationship and knowing the borrower), Capactity (the planned exit strategy and the ability of the borrower to pay back the loan), and Collateral (what happens if the borrower can't/won't pay...how is the lender going to recoup their investment and how long will it take). I, and most real, experienced lenders will not do 100% financing for an investor, non-owner-occupied deal. Be wary of those that say they will and really, really look at their backgrounds.