Purchasing Off Market Deals With Traditional Financing

Rental Property Investor · Atlanta, GA · Member since 2018 · 10 posts · 4 votes

I live in Atlanta, Ga and am in search of my 2nd investment property. I currently have two agents sending me properties but would like to begin searching for off market deals to increase the amount of potential leads. My main question is how to go about purchasing an off market deal with traditional financing. Is hard money or cash the only way to finance these deals? I don't love the idea of hard money loans and don't have enough cash to buy a house outright. Any thoughts?

I'm eager to give FB ads a try but all ads I see are marketed by cash buyers.

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Bob Green

Lender · Mokena, IL · Member since 2014 · 1k+ posts · 261 votes

Hello Jacob,

I assume the off market properties are foreclosed? If the property is a foreclosure being sold "as is" conventional financing is not an option unless its going to be a primary home. In this case there is a rehab loan option with long term financing available. Are you a buy/hold or fix n flip investor? If buy/hold you can easily be in and out of a HML within 90 days. The key to HML is high leverage and short term financing. Even if you are a fix n flip investor and HML scares you, the best advice I can give you is to invest in a fix n flip property that cash flows strong enough to be turned into a rental property. You finance guy can easily let you know this before you acquire the property.

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Jonathan GreeneBusiness Member
Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
6y
There are some wholesalers who will let you know that the seller will accept financing, but it is dependent on how active your market is and how active the off-market activity is. The more bids any property gets, the less likely financing will be attractive unless it is much higher. It's not impossible, but if you aren't getting off-market leads on your own, it would have to come to you from someone.
Others will say otherwise, but Facebook ads for distressed seller leads are not great at all. The best lists are built with older homeowners who have owned the property for 15-20 years and they are not looking at ads on Facebook. Facebook, in general, will get you a ton of "leads" but 99 percent of them are terrible. This goes for on-market and off-market. It's a numbers game, but the lead flow can be overwhelming (and garbage) if you know how to do FB ads.
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Bob Green
Lender · Mokena, IL · Member since 2014 · 1k+ posts · 261 votes
6y
Hello Jacob,
I assume the off market properties are foreclosed? If the property is a foreclosure being sold "as is" conventional financing is not an option unless its going to be a primary home. In this case there is a rehab loan option with long term financing available. Are you a buy/hold or fix n flip investor? If buy/hold you can easily be in and out of a HML within 90 days. The key to HML is high leverage and short term financing. Even if you are a fix n flip investor and HML scares you, the best advice I can give you is to invest in a fix n flip property that cash flows strong enough to be turned into a rental property. You finance guy can easily let you know this before you acquire the property.
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Jacob Lee
OP
Rental Property Investor · Atlanta, GA · Member since 2018 · 10 posts · 4 votes
6y
Originally posted by @Jonathan Greene:
There are some wholesalers who will let you know that the seller will accept financing, but it is dependent on how active your market is and how active the off-market activity is. The more bids any property gets, the less likely financing will be attractive unless it is much higher. It's not impossible, but if you aren't getting off-market leads on your own, it would have to come to you from someone.
Others will say otherwise, but Facebook ads for distressed seller leads are not great at all. The best lists are built with older homeowners who have owned the property for 15-20 years and they are not looking at ads on Facebook. Facebook, in general, will get you a ton of "leads" but 99 percent of them are terrible. This goes for on-market and off-market. It's a numbers game, but the lead flow can be overwhelming (and garbage) if you know how to do FB ads.

Makes sense. So when pursuing an off market deal I'd essentially have to be clear from the get go that I'm solely interested in financing? Whether that's in an ad description, direct mail letter, etc. But it also sounds like it'd be a better use of time to have a wholesaler only send me properties when a seller is open to financing.
Thanks for the tip on FB. Probably just saved me a lot of wasted time!

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Jacob Lee
OP
Rental Property Investor · Atlanta, GA · Member since 2018 · 10 posts · 4 votes
6y
Originally posted by @Bob Green:
Hello Jacob,
I assume the off market properties are foreclosed? If the property is a foreclosure being sold "as is" conventional financing is not an option unless its going to be a primary home. In this case there is a rehab loan option with long term financing available. Are you a buy/hold or fix n flip investor? If buy/hold you can easily be in and out of a HML within 90 days. The key to HML is high leverage and short term financing. Even if you are a fix n flip investor and HML scares you, the best advice I can give you is to invest in a fix n flip property that cash flows strong enough to be turned into a rental property. You finance guy can easily let you know this before you acquire the property.

I am a buy/hold investor, how would I go about paying off the loan w/in 90 days using a buy and hold strategy? I guess I've always thought of HMLs being used for flips. - thanks!

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Ken Morton
Rental Property Investor · austin, TX · Member since 2020 · 18 posts · 1 vote
5y
Hi. From what I have heard and read if you get the property at at great deal 75% of ARV with a HML you can fix it up and rent it out then refinance with a traditional 30 yr loan and pay the HML off and hopefully cashflow. Basically a BRRRR. I'm learning but if you find a great deal I wouldn't be scared of HML.
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