Nick,it's guru talk!
Telling a bank they are getting a 75% and getting say 105% CLTV might get you arrested!
Just stop reading that stuff, LOL! If it sounds too good to be true, it probably is! :)
Yes, this stuff was much more a reality back before the real estate bust...the gurus haven't updated their courses, I guess...
These days (as Bill indicated), banks aren't generally going to allow the seller to carry-back a portion of the loan -- they're going to want to see the buyer have some skin in the game.
As for seller financing, it exists...it's just *really* tough to find. The reason being, to seller finance, the seller needs to have equity, and these days, a lot fewer sellers have equity than 5 years ago.
Not saying it can't be done -- plenty of experienced investors probably still successfully close owner-finance, subject-2 and mortgage wrap deals -- but they're not as easy a seminar or course will make them sound.
There may still be a possibility of a bank putting in 75% - you put in 15% and the Seller carry back a 10% second. You still need to have some of your own money in the pot.
In the file area - I have posted an excel form called zero down. It is a one page list of possible motivated sellers. To get a 100% Owner carry - you would need to have a seriously motivated seller and either no balance on a loan or a balance you would accept using subject to.
If the home owner is upside down and owes more than what the property is worth - you would probably need to work with the bank to get then to accept a lower payoff amount to make anything work.
All the deeds and notes I've seen recently (at 4 banks in Denver) explicitly prohibit any sort of second mortgage on income properties. Primary residences are OK.
If a second is placed later, they could call the note, but usually don't if it is performing.
Aren't you giving the investor any collateral?
What does your common sense tell you? If you were a bank, would you balk at a borrower who has no money wanting to buy a million dollar property?
The banks have been through a period where they got whacked pretty good by borrowers cutting corners and lying on apps. They are tremendously more vigilant and suspicious now. They routinely reject loans that are perfectly legit simply "because". Take a look at a Bank Commercial Loan application. Read the questions they ask and read the fine print. That will tell you what you have to disclose. It is common for them to ask if any of the down payment is borrowed.
Not saying this hypothetical is impossible. Just very very very unlikely.
Just getting a 75% LTV commercial loan is no walk in the park.
You will learn more by actually going in to a bank and telling them what you want to do and asking them what their requirements are.
Things used to be very loose for getting commercial loans. However the banks have really tightened up their lending standards:
1. Used to be minimum 20% down now they want 35-40% down.
2. Loans were non-recourse = the bank takes over the property and that was it. Now they are full recourse. They take the property and anything else they can get their hands on if you default.
3. It was your property and if you wanted a second, third, fourth or fifth mortgage - that was your business. As long as they were in first position - they did not care. Loan documents now state NO mortgages behind their first unless they specifically approve it in writing first. I doubt anyone has attempted a second mortgage.
4. Loans did not have any prepayment penalties. Then they put in prepayment penalties 5% first year, 4% second year - after fifth year no prepayment penalties. These prepayment penalties did not kick in if you did not exceed 20% of the outstanding loan balance. I just refinanced 2 MHPs this year and there is a 3-year prepayment penalty on a 5-year locked loan. 3%, 2%, 1%, then open. These loan documents read no prepayment at all during the first three years.
What you sign at closing is basically signing everything over to them in case of a default. Should I ever build up enough to have over 50% equity and only borrow under half of the LTV I want to see if I can dictate or change their loan requirements. All they can do is say no.
Nick it's a bunch of crap to sell a system. They know many like you maybe have enough to buy a course or something or do a seminar at the least.
These people maybe have completed one or two deals or none at all.
The guru's realize it's much easier to hype you up and sell stuff than do deals with the techniques they are pushing.
Think about it this way. A bank has a bunch of crud on it's books from bad and loose legacy loans from the boom times. They are trying to shed that off the books.
The bank now has say 50 million to allocate to commercial real estate lending for new loans. Do you think they will approve a technique you are trying with no money down with regulators breathing down their necks or do you think they will wait and do a deal with an investor who is solid and has plenty of skin in the game??
I am putting my money on the bank waiting for a solid and strong purchaser.
If you land an incredible deal you can pick up a cash partner but will have to be careful they do not cut you out after showing to them. It sounds like to me right now you have limited value to a real estate deal. You do not have the money and you do not have a deal. What you need to now is get educated and make yourself valuable to others and that will open up doors for you.
There are owner finance deals with no money down but the price is generally inflated and you buy into a bad deal with a balloon note that comes due and the property is still marginally performing. Even with no money down for a commercial deal you will STILL need over 10k to close.
Site inspection, cost reserve stable, phase 1,survey, appraisal (if you want), title search, title policy (if you want), closing costs, etc.