House Hacking: Is this possible with 100% Private money?

Question

Hey Guys, I’m 19 about to be 20 and I want to try house hacking so I have less expenses to worry about and focus on wholesaling and fix and flips. I am building my credit rn still 3 months in but don’t really have any capital at my disposal. Is it possible to get a duplex, triplex, or 4-plex with 100% private money loan and live in one unit while using the rent from others to payback? If not what other options do I have to be able to do this?

Chris Mason · Answer

Yes, if your rich uncle or ex or cousin or buddy at work wants to loan you 100% of the purchase price, they are free to do so! And, typically, if it's a one off, in most states, zero licensing stuff is required. Boom, done, hit your uncle up and buy that $2,000,000 fourplex with 0% down and no closing costs. Easy peasy.

Note that hard money is not private money, no matter what hard money marketing BS claims. Private money is someone you personally know, typically someone you've known for years and years. By definition. Again, this remains true no matter what anyone's marketing stuff says.

Femi Kolawole · Answer

@Kyle J.Thank you guys I’ll save up and try an FHA loan.

Jason Dillard · Answer

@Femi Kolawole we have done this about 500 times with private lenders.  Not family.  Leave closing with cash for remodel.  Nobody has gone bankrupt.  The key is to make tons of offers to buy property and to get money.  We only go up to 75 percent of value.  BTW finding a deal is much harder than finding the money.   We only go to bank on large commercial deals.

Kyle J. · Answer

No for several reasons:

#1 - They won’t typically lend on owner-occupied properties.

#2 - Outside of your family, you’re not likely to find a hard/private money lender willing to loan you 100% of the purchase price with zero out of pocket from you.

#3 - The terms of most hard/private money loans are going to be pretty short (12 months is most common).

Most hard/private money loans are ideal for flippers who get in and out of the properties in a short amount of time, not someone who is planning to buy and hold. If you were planning to buy and hold, you’d need to refinance before the loan was due so you could pay it off. But then you’d be paying closing costs twice so you might as well just get a conventional loan from the start, especially if you’re planning to owner-occupy it because you’ll be eligible for the best rates. And if you go the FHA route, you’ll have some very low down payment options (even on multi-unit properties with up to 4 units), which it sounds like you’ll need in your situation.

Chris Mason · Answer

They'd go bankrupt really quick, obviously. So you'd just have to be one of the only 2 or 3 loans they do before they go bankrupt.

Femi Kolawole · Answer

@Chris Mason Thanks Chris but how about hard money lenders or private money outside your family.

House Hacking: Is this possible with 100% Private money?

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