Is it really possible to buy with $0 down?

8 Replies

I am a first time homebuyer in Oklahoma City and don't have much saved up yet. I'm looking at a deal for a duplex at 160k and needs about 50k worth of work (I'm planning on living in one side for at least a year). Estimating the ARV to be about 250k. Will hard money lenders lend me the purchas price and rehab cost for 0 down? I've looked into FHA 203k loans but haven't found any banks that offer that loan. I feel stuck.

All HMLs will require your skin in the game to the tune of 20% - 30%, and it's on investment properties only.

@Jason Easter you got a great idea for this one! It will take some planning, diligence, and patience but it should be possible to execute something like this. There are several lenders in my network that do 203K loans, and there are several ways to play this.

I would recommend asking your agent for guidance with lender recommendations, and how to move forward on this. They should be able to work that, or if not I’d be happy to give you some “next steps”

Good luck in the hunt,

Will

@Jason Easter will this be your primary home? As long as it is your primary home an FHA loan can fit. Hard Money loans will not be able to lend on your primary home though and FHA loans cannot lend on investment properties. That's why I'm asking.

Now, is it possible for you to put 0% down on a duplex property that needs work as your PRIMARY HOME?  The answer here is "no" unfortunately.  However, if you were buying a single family home that needed NO work, then the answer would be "yes".  Most "Downpayment Assistant Programs" (DAP) help people with their downpayments.  Saving for a downpayment is the hardest step for most "first time homebuyers".  But many DAPs don't have the requirement of you being a first time homebuyer (but some might).  So in theory, you could purchase a home, with 0% out of pocket with a DAP.  It's just that DAPs are designed for Single Family Homes and I have not heard of any that allow renovation loans in their programs.

Now, is it possible for you to put 0% down on a duplex property that needs work as an INVESTMENT PROPERTY? In theory it is possible. Since most Hard Money Lenders will lend up to a % of the property After Repair Value (ARV). However, since this is your first property - ever - it is likely that they would want SOMETHING from you in regards to a downpayment. As you work with a HML on multiple occasions they might be willing to waive that since they know you and feel comfortable with you.

*WHEW*  I know that's a lot but it's the right information for you to have.  Feel free to ask anything else that you may need.  Thanks!

@Jason Easter my best suggestion would be to save around $10k and do an FHA loan on something that doesn't need much work. (3% down, 5k in closing costs and prepaids) With very little cash cushion you're taking on a lot of risk with a major rehab and you don't have a security net to fall back on if something goes wrong.

You could easily house hack something at a lower price point. There are rentals in decent parts of the city that are priced at 80k. They don't need work and they're already in a place where they're performing. Move into one of these for $2.4k down and 5k in closing costs. Then you'll likely be hugely reducing your living expenses which would allow you to save for another down payment. In a year you can move out and rent that property. At that point you might be in a place where you can take on a bigger deal with your savings and new cash flow or, you can simply repeat! 

Originally posted by @Jason Easter :

I am a first time homebuyer in Oklahoma City and don't have much saved up yet. I'm looking at a deal for a duplex at 160k and needs about 50k worth of work (I'm planning on living in one side for at least a year). Estimating the ARV to be about 250k. Will hard money lenders lend me the purchas price and rehab cost for 0 down? I've looked into FHA 203k loans but haven't found any banks that offer that loan. I feel stuck.

I've bought houses for $500 and $100 multiple times but still it takes closing costs, title report, escrow, and reserves. There are costs for utilities and other variables. Sometimes you can use your credit card to get enough money to do the transaction when first starting out or borrow a sum of money form a family member. 

I send actual samples of properties I've done upon request to my Turnkey buyers. This is done all day long by people across the country. Just be aware that you have to know what you are doing and it's a little more advanced technique. It's helpful to work with someone doing them to learn the ins and outs.

Here's how:

Average Turnkey Cash Flow Per Door In Phoenix Metro Area No Bank Financing Needed

https://www.biggerpockets.com/forums/600/topics/584916-average-cash-flow-per-door-in-phoenix-metro-area

 

Jason Cornerstone does the 203k loan and you'd be able to do that with 3% down.  Anything over 30k in rehab costs is a bit more complicated of a transaction and requires more fees and regulations.  So if possible I'd try to keep it under that.  But I did a full blown 203k project with a 90k rehab and it allowed me to get my start in real estate.  Good luck! 

@Jason Easter for a property that youre living in, it will be very difficult to do. If it were an investment property only, you have more options but there are more stringent rules for lenders on primary residences.