How to finance the down payment

Question

Hello BP community,

Before I place an offer on a single family for use as a rental, I’d have to place a contingency on my offer based on finance approval. For 385K and the home needing some repair, are there creative options to come up with the down payment (20%, non FHA-VA)?

If I’m not mistaken, hard money lenders are more interested in distressed homes, which this is not. Would appreciate any advice. Thank you!

Dan Kim · Answer

@Emmanuel A Gomez

Thanks. I’ll have to look into those options.

Dan Kim · Answer

@Mike Klarman

The repairs have been done with the current owner. So not much going into that. Rent would be 2,800 a 3,000/mo

Emmanuel A Gomez · Answer

Look into transactional lending and JV with someone

Mike Klarman · Answer

Dan, the home doesn't need to be distressed.

If the Purchase Price is 385k, how much repair needed?  25k?

You can pick it up in a bridge loan with rehab and get the repair money and then get it rented and refi into a 30 year DSCR.

What will the rent be?  After Repair what will the value be?

Peter Mckernan · Answer

Family is the best move for this on down payment help... Or a JV deal.

Jay Hurst · Answer

for the vast majority of loan programs out there you cannot borrow the down payment except from a collateralized loan like another property you own or a 401k loan etc.  But, for non-owner occupied properties you just need to be able to come up with the down payment.

Dan Kim · Answer

@Charles Carillo

I see. Then typically lending money for a down payment isn’t hard money territory. The only options I know now are seller financing and private lending in this scenario.

Charles Carillo · Answer

@Dan Kim

What hard money lenders want is to be the first position on the property. They are not going to take a subordinate debt position. You might find a private money lender however, this is a very risky investment for them since there will be little to no equity in the property.