How can I buy with no money down?

Question

I have a property listed for 375, 000

Has a business using 7,000 sf of the first floor it has 3 total floors with a total of 21,000 sf I may have the deal worked to buy the business which will pay the building 2000 a month in rent . I also am close to having the building for 300,000 with seller taking financing for 30% 90,000 for 5 years with no payments or interest. I’m looking to get financing for this commercial property for the remaining 210,000 with nothing down . I will be buying the business using a sba loan with 15% down and my plan is to build one apartment immediately upon owning the building. Is this possible to do with nothing down. Is there a lender/ lender type anyone recommendeds.

Dustin Tucker · Answer

I have had this situation come up several times this year, in multiple states, Lenders want to have the borrower have skin in the game at this point in time.  If you are buying a commercial building and occupying 51% of it, you can use SBA financing, although SBA financing is currently 11% Interest on a 10 to 25 year amortized schedule.  The advantage of the SBA financing is that you will only have to bring 10% to the table, but you will also have to show with the existing building and your Adjusted Gross income that you have the capacity to pay for the new debt.  I have some SBA lenders that have no minimum FICO requirements, DM me and and I can send them to you.

Gregory Wilson · Answer

Apparently in Texas which might as well be the Moon as compared to Cincinnati, commercial lenders do not permit subordinate seller financing. This is true in Ohio as to residential owner occupied but not commercial. In fact, in Ohio one can do a cash out refinance where not only does the owner have no cash invested equity, only loan to value ratio of 70% met,  he may have cashed out more than he paid for the property. Loan to value and reliable source of payments is what matters. This lending environment is local so just ignore people from 1500 miles away when they tell you what a local lender will do. Just get a loan broker residing in Cincinnati, pay the extra origination cost (those fees are usually buried in a lender's origination fee anyway) and find the right lender for your situation. You can learn from what he does for you and next time maybe DIY.

Chris Seveney · Answer

@Daniel Myers

To follow on what Don mentioned, lenders also look at it as a greater risk when the tenant and owner are the same person. While it’s a different entity the cash flow from the building relies on income from your business.

I would either buy the business or buy the building.

Another option would be a lease option on the building where you lease it and buy it after a period of time.

My other question is what type of building is this and where is it located that a 7,000/sf space is only $2,000/mo. That seems very low. Is it NNN lease ?

Gregory Wilson · Answer

I think the online lenders or a loan broker are your best choices. Your SBA lender will also be a good lead since they can cross collateralize the loan.

Gregory Wilson · Answer

If the seller subordinates his seller financing and mortgage to the institutional lender you won't have a problem. If not, it won't happen that way and you will have to look at a lease option to purchase.

Please note that $2000/mo lease is probably a better deal than a $300,000 purchase taking all factors into consieration.

Please note that $2000/mo lease is probably  a better deal than a $300,000 purchase taking all factors into consieration.

Farley Youman · Answer

Good comments from everyone, but of there can always be exceptions in rare cases.

Consider that I set up a loan in Tampa where my client put no money down at all. This was just for a single family house, but the loan was for 1.4M!

The way that I set it up along with the client:

-Client got her long time friend to put up 200K for the deal at closing.

-I attached this second loan to the first one I set up. Some lenders do not allow this- but I found one that would.

Final note: this is the ONLY loan that I have set up in multiple years of doing loans. So, Don is right, this is not normally okayed (no financial skin in the game).

Finally, as Chris mentioned- this deal has some additional layers of possible risk.  Lenders are very cautious, and the ones that I have seen over the years that are not- are not in business anymore.  Always ask yourself, if this was your own money to lend to someone else- would you loan it out in this situation? I wish you luck- or to find a partner who will put the down payment for you.

Daniel Myers · Answer

Thank you very much for your reply Gregory Wilson ,I think they will except a 2nd position because it’s only 30% of the price. Any advice on where to get the best commercial loan? Traditional banks , online lenders or? I’m use to residential loans and have the best loan officer around but she doesn’t do commercial so I’m searching for someone who knows what the doing and how to work around problems that arise.

How can I buy with no money down?

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