Funding for a portion of a down payment

Member since 2023 · 8 posts · 6 votes

I have an opportunity to purchase a triplex with a partner. The triplex is occupied and currently bringing in positive cash flow. Since it’s an investment property, my lender told me we would need to put down 25%. My partner and I don’t necessarily want to part with that much of our funds. If you wanted to fund a portion of the down payment would you suggest a hard money lender, personal loan, etc.?

I’m also fairly new to investing and this would be the biggest property that I have the opportunity of purchasing so all suggestions are welcome!

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Jay HurstBusiness Member

Lender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes

Quote from @Paige Seeley:

@Jaycee Greene the property is in NC. The property rents for about $4K/month total. Purchase price will be around $400-450K. We both have good credit but my lender made it seem like there was no getting around putting less than 25% down on an investment property. So I’m trying to come up with a game plan

Conventional loans do require 25% down on an investment property. Those rules are set by Fannie/Freddie NOT your lender, or any other lender in fact. Also, conventional lending will NOT allow you to get gift funds OR borrow unsecured funds to help fund a down payment on an investment property. You can borrow against a 401k or another property you own for example, but that would a secured loan. You also cannot use a second mortgage (from HML/private lender) for a 2-4 unit non owner property. The 25% has to be your funds.

Now, there are non conventional options that would be a bit more flexible but even most of those programs will require at least 20% down with no second mortgages filed on the property.

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Jaycee GreenePro Member
Real Estate Consultant · St. Louis MSA · Member since 2024 · 3k+ posts · 727 votes
1y
Quote from @Paige Seeley:

I have an opportunity to purchase a triplex with a partner. The triplex is occupied and currently bringing in positive cash flow. Since it’s an investment property, my lender told me we would need to put down 25%. My partner and I don’t necessarily want to part with that much of our funds. If you wanted to fund a portion of the down payment would you suggest a hard money lender, personal loan, etc.?

I’m also fairly new to investing and this would be the biggest property that I have the opportunity of purchasing so all suggestions are welcome!

Hi @Paige Seeley. Can you share what city in which this property is located? Some HMLs have lending restrictions by state. Also, what is the purchase price and current monthly rent?
Most HMLs, depending on your and your partner's credit score and experience, only require 15%-20% equity/down payment from borrowers.
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Paige Seeley
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Member since 2023 · 8 posts · 6 votes
1y
@Jaycee Greene the property is in NC. The property rents for about $4K/month total. Purchase price will be around $400-450K. We both have good credit but my lender made it seem like there was no getting around putting less than 25% down on an investment property. So I’m trying to come up with a game plan
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Jay HurstBusiness Member
Lender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
1y
Quote from @Paige Seeley:

@Jaycee Greene the property is in NC. The property rents for about $4K/month total. Purchase price will be around $400-450K. We both have good credit but my lender made it seem like there was no getting around putting less than 25% down on an investment property. So I’m trying to come up with a game plan

Conventional loans do require 25% down on an investment property. Those rules are set by Fannie/Freddie NOT your lender, or any other lender in fact. Also, conventional lending will NOT allow you to get gift funds OR borrow unsecured funds to help fund a down payment on an investment property. You can borrow against a 401k or another property you own for example, but that would a secured loan. You also cannot use a second mortgage (from HML/private lender) for a 2-4 unit non owner property. The 25% has to be your funds.
Now, there are non conventional options that would be a bit more flexible but even most of those programs will require at least 20% down with no second mortgages filed on the property.
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Paige Seeley
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Member since 2023 · 8 posts · 6 votes
1y
@Jay Hurst even with 20% down, what non conventional options are you talking about?
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Jay HurstBusiness Member
Lender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
1y
Quote from @Paige Seeley:

@Jay Hurst even with 20% down, what non conventional options are you talking about?

Non conventional just means the loan will not be sold to Fannie/Freddie so they do not have to follow those rules. I do not lend in NC so I cannot help but I have several options with 20% down on a 2-4 unit. I would suggest going to the find a lender tab here on bigger pockets to find a local lender who has the same products.
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Jaycee GreenePro Member
Real Estate Consultant · St. Louis MSA · Member since 2024 · 3k+ posts · 727 votes
1y
Quote from @Paige Seeley:

@Jaycee Greene the property is in NC. The property rents for about $4K/month total. Purchase price will be around $400-450K. We both have good credit but my lender made it seem like there was no getting around putting less than 25% down on an investment property. So I’m trying to come up with a game plan

@Paige Seeley Your lender is probably saying that because in order to borrow from THEM, you have to put at least 25% down. Bankers are generally not aware of hard money loan options, and even if they are, they don't generally refer them when they believe they can approve a loan to you from their bank.
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