Private financing options

[Andrew Galeano]

Hey everyone

I had a question - would I be able to borrow just the down payment + rehab from a private lender? Or would I have to borrow the entire asking price from the private lender? The numbers work so much better if I just borrow the down payment and rehab but Im unsure if there are any restrictions against that or any issues the bank may have

[Mike Zins]

Hey Andrew,

As stated above, most of the time a private lender would loan you a percentage of your acquisition, and a percentage of your rehab (or sometimes the full thing). Most lenders will want you to have some sort of skin in the game. 

Also for renovations, many lenders will have you pay for the work being done to the property first, and then get reimbursed when it's complete (the whole project doesn't need to be complete, but they will usually reimburse in phases). So make sure you verify how the rehab draws work with your lender, and make sure you have enough cash accordingly. 

If money for down payment and rehab is an issue for you, here are two suggestions:

1) Find a Joint Venture Partner to help fund your deal

You could find someone who could provide some of the cash you need for down payment, and to front the renovation costs. You could offer to do a profit split with them. You are doing the work, they are providing the funds needed, and you can split the profit at the end of the project. 

2) See if the lender will let you cross collateralize. 

In order to do this, you need to have another property with equity in it. Lender's will sometimes take this as additional collateral, thus allowing you to come in with less money down. 

I hope this is helpful. Good luck!