For once I'm not here with a newbie question that needs a solid answer. I recently listened to the BP Podcast featuring Ben Leybovich, and he spoke of having a 100% financed property, making $100 CF/unit being his minimum return. So what I'm asking for is some of your guys' experiences with getting a 100% financed properties that you plan to buy and hold. I'm looking at a duplex for my first 2 purchases so if it applies to that, great. What did the private investor ask for in return? Was it a basic mortgage at 5% over 30 years? 15 years? What happened if you refinanced and paid early, did you still pay them the 5% on top? Did they ask to be a partner and split profits? Somewhere in between? How did these deals work out? Were they good or bad in hindsight? If you want to give your personal hard numbers great, if not, maybe speak in terms of a 100k duplex cash-flowing 100 per unit.
I pretty much do all my flips 100% financed. Hell, I'll pull some money out on the front sometimes as long as the house/project can afford it and still keep my lender under 70% LTV and I need/want the cash.
On a buy and hold, there are a lot of ways to do that. In our world creativity is key, it really just depends on what comes at you. Most of the time on a 100% financed buy and hold it includes some owner financing of some sort. You borrow from the bank for 80% and the seller agrees to hold a 20% second. Or they own it outright and agree to finance it to you. Something like that.
You could always have a money partner that puts up all the money and you do all the work and you split things. The partnership stuff is just what you guys work out on the deal. Generally speaking when you start you'll give up more of the deal to get access to money and as you get more experienced you command more of the deal and let them in.
You could take it 'subject' to from someone in foreclosure and put a small private loan on it to fix it up and cover pays until you get it rented out. I used to do a lot of that back in the day- sub2 out of foreclosure, do a small ($20kish) private loan to catch up the pays and do a light rehab, then L/O it out. Came back and bit me in the *** when the market tanked, but still a viable strategy if you wanted to be in rentals at 100% financing.
Most private investors are people you know who will loan you money. Almost by definition if they are sophisticated enough to seek you out (advertise), they aren't private lenders. My first PL was my dad's secretary and she loaned us $25k to do a flip, we paid her something like 20% interest. The ones I did on my L/O's were family, I paid them 12%. Most normal people wont give you their savings/retirement money for a 30 year loan at 5% and most people with real money are making a steady 8% with their CFP or whoever. I pay my main lender 2pts and 12%, so he's making 14-16% or so with me. Thats enough to keep him interested. Anyway, again, that's whatever you and your lender agree to, I'm just pointing out that most private money is too expensive to use for long term buy and holds, you're more looking for creative deals to do 100% on the long term stuff.
@Darrell Shepherd , that's exactly the kind of insight I was looking for! Thanks for taking a min to respond. I have a few people who would be potential lenders and I was just curious as to what might "keep somebody interested." Obviously everybody is different I just want some real world examples to see what works for some people. I think the statement that you made about people not giving out their life savings for 5% makes perfect sense. Thanks again!
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