Rental Property Investor · Dayton, OH · Member since 2017 · 48 posts · 68 votes
I have the opportunity to acquire a vehicle at an incredible discount. The purchase price would be 2750 and the retail value would be 8300. A local bank has run the numbers and I can put a car loan on the vehicle for up to 125% LTV for a loan of 10,375. Subtracting out the 2750, that leaves me about 7600 I can cash out of this loan.
My question is this - would I be able to use that as contribution on a down payment on a property? I'm not sure if this is even legal, using a loan as down payment, but I thought it would be a great opportunity if it is. Essentially I would buy a car that lets me buy a house that pays the house and car off!
Investor · Avilla, IN · Member since 2013 · 796 posts · 769 votes
8y
Jeremy Hua
I started off leveraging in any way I could to buy real estate about 7 years ago. I quit my job with 28 units almost 4 years and now have 64 units. I’m making considerably more money than I was working and I expect more than double my income over the next 5 years.
As long as he’s making good investments I don’t see a problem with his strategy. You gotta do what you gotta do to get to where you wanna be. No two paths/situations are alike in this business. Even if he fails...at least he’s getting off the couch. I’ll bet somewhere around 70% of the people that join BP never do a deal or at least don’t do multiple deals.
Rental Property Investor · Charlotte, NC · Member since 2017 · 298 posts · 232 votes
8y
Nathan Rude I also agree with others about not financing the car but rather reselling it, unless you really need the car. I would not finance over 100% of the value.
One other thing I forgot to mention earlier. If you are serious about buying a property that you will clearly need to finance then you MUST find your mortgage lender first. Run all potential purchases, refinances etc by them first before doing anything, especially once you go under contract. A quick flip like the opportunity you have on the car might not be bad but run it by them anyways.
One last note. Do your due diligence on the car and make sure it’s not a too-good-to-be-true deals. We did just have two major hurricanes come through the southeast (Texas and Florida) and you wouldn’t want to find yourself stuck with a flood car because someone pulled a fast one on you.
Asheville, NC · Member since 2017 · 170 posts · 242 votes
8y
Ok, I’ll bite since everyone is opposed.
Aside from the fact that you may not be able to use this cash as a down payment with a regular mortgage unless you season or launder it, (they want it to be your money or in some cases gifted money and not borrowed ), I actually like the idea of the reverse car loan- presuming it’s a low interest rate. Car loans are some of the cheapest loans you can get.
So if you need a loan, and they’ll give you 10k+ at less than 4% interest, where else would you get that rate?
Yes vehicles depreciate.
But people get car loans everyday.
If I can use $10k to double my money vs pay off a car loan, I’d double my money ANY DAY.
In theory, if you had a great deal, and you have a private money lender who will fund 90% and you need that 10% - and this car loan will get you there - you’ve turned your $2700 into $10k and hopefully will make good decisions that will net a profit.
It would make more sense to me if this was to fund a flip vs buy and hold. I can’t imagine you’d want to do this to buy a rental property.
It’s a risk. We all take risks in real estate.
Goleta, CA · Member since 2018 · 5 posts · 0 votes
8y
I'm with @Caleb Heimsoth ! You already have the "Deal" buy the car and sell it at a profit. This is the same as buying a house you can flip for profit. Learn proper money management. Why would you want to owe money on a depreciating car?