Where can I find $250,000 for a down payment?
Member since 2020 · 6 posts · 13 votes
Where can I find $250,000 for a down payment?
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Malcomb StapelPro Member
Investor · Topeka, KS · Member since 2020 · 669 posts · 488 votesI'm with @Allan Smith on this one. You sound so far behind the 8 ball that it feels extremely unprofessional. You knowingly signed a contract with a sizeable down payment that you do not possess the ability to pay. Keep in mind that on the other side of that contract is a seller that is making plans which involve you actually doing what you promised.
Your best options might be to wholesale it, or call the seller tomorrow and let them know you can't do what you signed up to do.
58 Replies
- Contractor · Nashville, TN · Member since 2014 · 1k+ posts · 1k+ votes4y
A lot of red flags here. $400 in cash flow for a 700k building is not good. Contracting a property with no where to turn for money except a vast land of real estate forums is not a great sign. 6% is a terrible return, it's less than inflation.
this is a tough one. Best thing to do is start calling everyone you know with money and ask if they've ever considered a passive investment in real estate.
- 4yMalcomb StapelPro MemberInvestor · Topeka, KS · Member since 2020 · 669 posts · 488 votes
I'm with @Allan Smith on this one. You sound so far behind the 8 ball that it feels extremely unprofessional. You knowingly signed a contract with a sizeable down payment that you do not possess the ability to pay. Keep in mind that on the other side of that contract is a seller that is making plans which involve you actually doing what you promised.
Your best options might be to wholesale it, or call the seller tomorrow and let them know you can't do what you signed up to do.
- Member since 2020 · 6 posts · 13 votes4y
Just a different way of doing things. I've got a property worth nearly $1 million under contract with seller financing that will cash flow more than $2000 per month in the first year and all I need to do is find some place to borrow the money from. Was hoping for creative ideas on here....business loan? Lines of credit? Etc.
- Laveen, AZ · Member since 2016 · 584 posts · 528 votes4y
Quote from @Stephen Hollenberg:
I'm under contract to buy a 6 unit, mixed-use property with seller financing. The seller will provide $700,000 of the $945,000 required. They are giving me 45 days to show proof of funds for the $245,000 so I need to find it!
-I can't take any more loans from my 401k.-I have 3 properties right now:
-Property A, worth $400,000, is currently financed at around 72% with potential to pull out $31,000 to get to 80%.
-Property B, worth $500,000, is currently in the process of being refinanced at 80% to pull money out to buy a separate property.
-Property C, worth $600,000, is my primary residence currently financed at 86% with potential for a HELOC to pull out $23,000.
If I can find $245,000 at 6% the property will still cash flow $400 per month at closing after all expenses, 5% vacancy, and 5% toward repairs. With potential rent increases and filling a currently vacant unit, it will cash flow over $2000 even fully financed.
Any help in where I should look would be appreciated!They went under contract with you without asking for proof of cash to close this deal?
Id like to understand why you went under contract without the cash ready and while you're already buying another property. How much earnest money do you have on the line?
Sounds like you may need to sell one of your properties to get the most cash possible and let go of the other pending transaction if you really want this building
- Contractor · Scottsdale, AZ · Member since 2010 · 2k+ posts · 3k+ votes4y
Quote from @Allan Smith:
A lot of red flags here. $400 in cash flow for a 700k building is not good. Contracting a property with no where to turn for money except a vast land of real estate forums is not a great sign. 6% is a terrible return, it's less than inflation.
this is a tough one. Best thing to do is start calling everyone you know with money and ask if they've ever considered a passive investment in real estate.
There are no red flags in his post. You must not have caught that he said it would cash flow $400 per month IF he got into a 100% financed situation where he borrows the remaining $245k at 6%, and that after rent increases it will cash flow over $2k per month (again in a 100% financed situation).
I'm not here to underwrite the deal because I don't know New Hampshire, but I will say that if OP's numbers are correct, this is a home run of a deal.
- Contractor · Scottsdale, AZ · Member since 2010 · 2k+ posts · 3k+ votes4y
Quote from @Malcomb Stapel:
I'm with @Allan Smith on this one. You sound so far behind the 8 ball that it feels extremely unprofessional. You knowingly signed a contract with a sizeable down payment that you do not possess the ability to pay. Keep in mind that on the other side of that contract is a seller that is making plans which involve you actually doing what you promised.
Your best options might be to wholesale it, or call the seller tomorrow and let them know you can't do what you signed up to do.
Don't be so dramatic. It is totally fine, professional, and industry standard to use your due diligence window to get your ducks in a row. That can be inspect the property, scope the sewers, visit with your contractor, visit with your architect, and/or arrange your financing.
- 4yJaron WallingPro MemberRental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
You have a property financed at 86% and you're comfortable with it?...
Pulling relatively tiny amounts of equity from numerous properties to fund another deal feels like a bad idea. You're just robbing other properties to fund a deal that cash-flows $400 per month before you spend even more fully financing it. Maybe I'm boring but I would have saved/generated $250k cash before going down this path.
- 4yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
I agree with those that think you're looking for trouble here. You are maxed out on every property you own. Why the rush to get another? Even at $2000 cash flow (IF that's correct?) you are still juggling a lot of balls in the air. Maybe that's comfortable for you, but.....?
I'd pay down some of your debt first, make your current properties more profitable, and enjoy life a little.
- 4yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Bruce Woodruff:
I agree with those that think you're looking for trouble here. You are maxed out on every property you own. Why the rush to get another? Even at $2000 cash flow (IF that's correct?) you are still juggling a lot of balls in the air. Maybe that's comfortable for you, but.....?
I'd pay down some of your debt first, make your current properties more profitable, and enjoy life a little.
refi till you die totally over leveraged.. if it all works then OK.. but some speed bumps and this could not end well.
Keep in mind finding the deal and the money will find you does get clicks etc but I see this all the time folks call me in a panic I need 500k by Friday to close this deal LOL.. I am in the school of having you money first then go shopping or know for certain you can get it. dont let Fomo drive these deals.. just sayin..so for tangible suggestions I would be shopping for an equity partner.. you have experience you can show that you can put a little bit of dough into the deal see if you can find someone who wants to be passive and you guys partner on it much safer for you in my mind.
- Investor · Tampa, FL · Member since 2011 · 2k+ posts · 3k+ votes4y
Sounds like you're stretching yourself too thin. Property B is currently being refinanced to buy a separate property.
After maxing out the equity in all these properties, maxing out loans from your 401k, while purchasing 2 more, are you going to have any money left for repairs/emergency fund or a drop in values? What if repairs are 15% instead of 5%? What if another tenant moves out? Does the property being purchased with funds from Property B refinance need repairs too? There's so many ways you're opening yourself up to get buried here. If everything goes perfectly it could work out. Personally I would not be willing to take on this level of risk.
- 4yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
- Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes4y
Quote from @Stephen Hollenberg:
I'm under contract to buy a 6 unit, mixed-use property with seller financing. The seller will provide $700,000 of the $945,000 required. They are giving me 45 days to show proof of funds for the $245,000 so I need to find it!
-I can't take any more loans from my 401k.-I have 3 properties right now:
-Property A, worth $400,000, is currently financed at around 72% with potential to pull out $31,000 to get to 80%.
-Property B, worth $500,000, is currently in the process of being refinanced at 80% to pull money out to buy a separate property.
-Property C, worth $600,000, is my primary residence currently financed at 86% with potential for a HELOC to pull out $23,000.
If I can find $245,000 at 6% the property will still cash flow $400 per month at closing after all expenses, 5% vacancy, and 5% toward repairs. With potential rent increases and filling a currently vacant unit, it will cash flow over $2000 even fully financed.
Any help in where I should look would be appreciated!"I could buy millions of $ of property if only I had some cash. What do I do?"
How does that around? That's basically what you're saying.
- 4yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Bruce Woodruff:
with the head winds seems like deleveaging some assets to position yourself could be prudent as well.
- Investor · Leander, TX · Member since 2016 · 296 posts · 402 votes4y
Could you sell and close on one of your rental properties in 45 days to finance this one? Not much time.
- 4yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Account Closed:
Could you sell and close on one of your rental properties in 45 days to finance this one? Not much time.
keep in mind if credit gets tight the first thing to go is all these HELOC's investors use.. they can get frozen and in some cases called and the borrower is stuck .. most borrowers that use helocs I flat guarantee do not read the entire note and have no idea that their helocs can be frozen and called..
- Member since 2020 · 6 posts · 13 votes4y
Quote from @Scott E.:
Quote from @Allan Smith:
A lot of red flags here. $400 in cash flow for a 700k building is not good. Contracting a property with no where to turn for money except a vast land of real estate forums is not a great sign. 6% is a terrible return, it's less than inflation.
this is a tough one. Best thing to do is start calling everyone you know with money and ask if they've ever considered a passive investment in real estate.
There are no red flags in his post. You must not have caught that he said it would cash flow $400 per month IF he got into a 100% financed situation where he borrows the remaining $245k at 6%, and that after rent increases it will cash flow over $2k per month (again in a 100% financed situation).
I'm not here to underwrite the deal because I don't know New Hampshire, but I will say that if OP's numbers are correct, this is a home run of a deal.
Thank you for this vote of confidence! Yes, it cash flows at 100% financing which is crazy to me and seems like a no brainer.
- Investor · Philadelphia Metro · Member since 2019 · 44 posts · 75 votes4y
I tend to agree with both sides of the discussion on this forum. Both that a deal that cash flows at 100% financing could be indicative of getting the property at a great price. I say could, because without actually underwriting the deal, the assumptions being used etc. no one can tell you for sure.
The other side of the discussion is that it seems you might be over-leveraging yourself on this property purchase. I don't know your risk tolerance, total amount of assets, income outside of real estate etc., but it does seem pretty tight on scraping together the funds to close the deal.
I echo Jay's comments on looking for an equity partner (or two) who has the capital to bring to the table for the down payment.
- Rental Property Investor · Fairfield, CT · Member since 2018 · 10 posts · 9 votes4y
@Stephen Hollenberg look for private Money from friends or family. @ 6% would be tough. At that price you will have to give up some equity. 10-12% would be more realistic
- Columbia, SC · Member since 2014 · 133 posts · 190 votes4yWhen I see posts like this I see folks that haven't been on the seller side of a bad deal. You are messing with other people's money, have your stuff together not a prayer that you will find money.
Quote from @Scott E.:
Quote from @Malcomb Stapel:
I'm with @Allan Smith on this one. You sound so far behind the 8 ball that it feels extremely unprofessional. You knowingly signed a contract with a sizeable down payment that you do not possess the ability to pay. Keep in mind that on the other side of that contract is a seller that is making plans which involve you actually doing what you promised.
Your best options might be to wholesale it, or call the seller tomorrow and let them know you can't do what you signed up to do.
Don't be so dramatic. It is totally fine, professional, and industry standard to use your due diligence window to get your ducks in a row. That can be inspect the property, scope the sewers, visit with your contractor, visit with your architect, and/or arrange your financing.
- Contractor · Scottsdale, AZ · Member since 2010 · 2k+ posts · 3k+ votes4y
Quote from @Adam Odom:
When I see posts like this I see folks that haven't been on the seller side of a bad deal. You are messing with other people's money, have your stuff together not a prayer that you will find money.Quote from @Scott E.:
Quote from @Malcomb Stapel:
I'm with @Allan Smith on this one. You sound so far behind the 8 ball that it feels extremely unprofessional. You knowingly signed a contract with a sizeable down payment that you do not possess the ability to pay. Keep in mind that on the other side of that contract is a seller that is making plans which involve you actually doing what you promised.
Your best options might be to wholesale it, or call the seller tomorrow and let them know you can't do what you signed up to do.
Don't be so dramatic. It is totally fine, professional, and industry standard to use your due diligence window to get your ducks in a row. That can be inspect the property, scope the sewers, visit with your contractor, visit with your architect, and/or arrange your financing.
Point taken but if you put an offer on a property because based on your initial review it looks like a good fit, I don't see this as messing with other peoples money.
Not to be harsh but I don't care about the sellers emotions when I'm doing a deal. This is business. If they accept my offer and we enter a contract, I will adhere to that contract by doing due diligence during my due diligence window, and back out of the deal in the event the property doesn't meet my expectations, etc. And in the case of the original poster on this thread, arranging funding is a fine part of due diligence, in my opinion.
(I should note that I have never personally had issues finding funding, and I've never backed out of a contract due to inability to fund the deal. I have backed out because of issues that came up with the inspection, negative external factors, detrimental comps showing up, etc. But if you have a good deal, finding funding for that deal is the easy part)
- Member since 2018 · 433 posts · 208 votes4y
When i write an offer i specify where the money is coming from. Is that not a thing? Like "contingent on x% financing from abc bank at x% for x years." The seller is welcome to accept it or not. If that finamcing falls through i dont see why i would fel bad. It was clear. But this... this is the reason sellers are asking for prrof of funds on 10k... lol
In regard to the HELOCs being recalled. Its real. You do not have to be late on a single payment. Its the craziest thing that you wont understand until youve seen it. No one wants to believe it.
- Member since 2020 · 6 posts · 13 votes4y
Quote from @Jeff Hudak:
@Stephen Hollenberg look for private Money from friends or family. @ 6% would be tough. At that price you will have to give up some equity. 10-12% would be more realistic
Thanks for the suggestion. It does cash flow at closing with up to 8% on the $245k down payment. Higher than that and it would be negative cash flow until I can renovate the currently vacant unit.
- Member since 2020 · 6 posts · 13 votes4y
Quote from @Scott E.:
Quote from @Adam Odom:
When I see posts like this I see folks that haven't been on the seller side of a bad deal. You are messing with other people's money, have your stuff together not a prayer that you will find money.Quote from @Scott E.:
Quote from @Malcomb Stapel:
I'm with @Allan Smith on this one. You sound so far behind the 8 ball that it feels extremely unprofessional. You knowingly signed a contract with a sizeable down payment that you do not possess the ability to pay. Keep in mind that on the other side of that contract is a seller that is making plans which involve you actually doing what you promised.
Your best options might be to wholesale it, or call the seller tomorrow and let them know you can't do what you signed up to do.
Don't be so dramatic. It is totally fine, professional, and industry standard to use your due diligence window to get your ducks in a row. That can be inspect the property, scope the sewers, visit with your contractor, visit with your architect, and/or arrange your financing.
Point taken but if you put an offer on a property because based on your initial review it looks like a good fit, I don't see this as messing with other peoples money.
Not to be harsh but I don't care about the sellers emotions when I'm doing a deal. This is business. If they accept my offer and we enter a contract, I will adhere to that contract by doing due diligence during my due diligence window, and back out of the deal in the event the property doesn't meet my expectations, etc. And in the case of the original poster on this thread, arranging funding is a fine part of due diligence, in my opinion.
(I should note that I have never personally had issues finding funding, and I've never backed out of a contract due to inability to fund the deal. I have backed out because of issues that came up with the inspection, negative external factors, detrimental comps showing up, etc. But if you have a good deal, finding funding for that deal is the easy part)
I wish finding the funds was as easy for me! By all accounts it seems like a great deal....I've run the numbers so many times using conservative figures and it continues to return a positive cash flow at 100% financed. Just need to find the cash!
- 4yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Shane H.:
When i write an offer i specify where the money is coming from. Is that not a thing? Like "contingent on x% financing from abc bank at x% for x years." The seller is welcome to accept it or not. If that finamcing falls through i dont see why i would fel bad. It was clear. But this... this is the reason sellers are asking for prrof of funds on 10k... lol
In regard to the HELOCs being recalled. Its real. You do not have to be late on a single payment. Its the craziest thing that you wont understand until youve seen it. No one wants to believe it.
there are a lot of gotchas in those 20 page notes that NO one ever reads and the lender never explains and maybe the MLO does not even know themselves.. but yes virtually every Heloc or unsecured LOC can be frozen and called unilaterally by the lender.. this is a fact.
- 4yJonathan StonePro MemberRental Property Investor · Camas, WA · Member since 2020 · 284 posts · 202 votes
@Jay Hinrichs
Guess all those velocity banking gurus are going to be mad about their HELOC being frozen.
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