@Elle Jones, as mentioned, unfortunately, cash is required even when it seems like it isn't. 100% financing is often on the purchase price and rehab, but there are fees just to secure the loan that need paid up front. Then there are reserve requirements, which you have to show proof of cash for. And often with draws, you have to submit paid receipts to be reimbursed, so you need cash to cover the timing of bill being paid and draw being funded.
How you get that cash is a little more fluid. You can beg or borrow it. You can partner with a financial partner to have it. Typically friends and family are the first targets.
I think hard money is an option but each hard money lender will have their own guidelines and fees. Check their max LTVs most still will require a down-payment. They can be expensive. Another option is to save or borrow for a down payment and purchase with conventional financing.
If you are thinking about hard money, you need to think about the longer term. Hard money is not a long term financing option so ideally you would want to refinance shortly after purchase with conventional financing.
I think the best option for you will depend on your goals, how much savings you have for a down-payment, rates/fees of hard money lenders, etc. If you currently own a home and you have equity consider a HELOC or equity home loan to provide the cash for a down payment.
You still need cash to get into a hard money loan. I'd say minimally you need to be able to come up with 30K from whatever sources you can to make it work and that's even at 100% financing.
@Elle Jones there are many strategies to buy with little or no money. @Brandon Turner wrote a book about it available under the bookstore tab above.
But while it is theoretically possible to do a deal with no money, if you don't have cash reserves you are taking a big risk that the deal might fail. make sure you only do GREAT deals so that if it doesn't work out as expected the deal still works. Good luck.
@Elle Jones, as mentioned, unfortunately, cash is required even when it seems like it isn't. 100% financing is often on the purchase price and rehab, but there are fees just to secure the loan that need paid up front. Then there are reserve requirements, which you have to show proof of cash for. And often with draws, you have to submit paid receipts to be reimbursed, so you need cash to cover the timing of bill being paid and draw being funded.
How you get that cash is a little more fluid. You can beg or borrow it. You can partner with a financial partner to have it. Typically friends and family are the first targets.
@Elle Jones Hard money is a great way to go but as stated above you will still need cash. Depending on your experience level you are looking at 25 to 30% down, up to 12% interest and 2.9 points and above. Depending on the lender, they may be willing to fold in the rehab costs for the loan, which is a good thing so you do not have to entirely come out of pocket for the reno but it will raise your down payment. You will need to make sure you can refinance out of it but I'm hearing minimum 6 or 12 months seasoning period minimum for banks right now. The good part is, the payments are typically interest only.
@Elle Jones I think you get the gist that hard money isn't a solution to a $0 problem (here is a guide on how lending works for BRRRRs. However, if you have the credit, ability to get a loan, and a great deal, you can get creative to find the money. Here are some ways to find a down payment:
- HELOC
- Lines of credit
- Family / friends who want a better interest rate than the bank
- Other investors who have funds to lend
- Investors who have retirement funds to self-direct
This is just a shortlist. Again, if you have the ability to find a great deal, the knowledge to run it, and in this case great credit, you can find the money (it will just take work!).