I have been inundated with various ambitious new investors looking to get started with zero of their own money…As the experienced RE investors know in this current financial climate it is near impossible to get started with no skin in the game…I constantly hear how lenders should feel lucky that they are approached with an offer to lend on ARV (essentially lending way over %100 of purchase price)…What these new investors dont realize is that there are tons of deals and or offers to buy deeply discounted properties and it doesnt take much effort to find these deals nowadays…Even today I was having lunch with a HML friend of mine and he told me how he was approached with this idiotic deal…A woman calls him up and says she wants to buy a duplex…100k(purchase price) and needs 30k in rehab work (she goes on to say that it will be worth 200k after rehab is completed)…Then in the next breath she says she wants to borrow 130k @ %12 and no points…LOL…So my friend asks what is your additional free and clear collateral to put up in replace of your lack of equity/money/skin in this deal…She becomes irate…She proceeds to say that she has never had to put up any collateral in the past…And how lucky my friend is to be making %12 on his hard earned money…And how he is the the fortunate recipient of her brilliant RE deal and will hold a coveted first position lien on her gamble…WOW TY…My friend quickly and correctly responds so why arent you dealing with your old HML…She responds well they dont do this kind of loan anymore…LOL…Is it me or is this lady dense…
A lesson to new and underfunded investors…
Find a partner who has capital…
Start wholesaling/bird dogging deals to build up your own capital…
Don’t assume lenders are morons…They see more deals than you could ever imagine…
Stop asking to borrow on ARV…There are almost NO HML’s or banks doing this anymore if any…
Overlending on properties is why this country’s RE market is in such bad shape…
If you have zero cross collateral,zero experience,zero capital would you lend to you???..
Sorry for the rant,I just can’t take this mentality anymore…
I agree. I think the best way to start investing with the least money down nowadays is to find a partner or a private money lender, who will take the property as collateral. You will be surprised how many private money lenders are out there, especially if the investment is short term or a flip deal. If you keep the property for a year or more, you can eventually refinance it and get the investor off the title.
How do you find these private investors? Contact real estate agents that deal with investors, they know cash investors. Have an agent run an MLS search for cash buyers in the last 6 months for the area where the property is at and ask the investor if they want to partner on a deal. Check your recorder of deeds office for cash buyers, who have purchased properties recently.
Don’t use credit cards, line of credit, etc. You will get in trouble fast, especially in this economy. Keeping a source of reserves available (cash or credit)is always the best practice.
The problem I notice is that most of these no capital to invest people are newbies to the RE investing business…It takes brass to expect to go into any business with zero experience and expect to do it with none of your own capital…Then these people become irate when you explain that it cant be done… :banghead
Cause they saw on a late night infomercial that it could be done. That is what they choose to believe. Even when an experienced lender tries to explain that it isn’t going to happen.
Eric,
As you know I do HML,I hold regular mortgages,do business lending etc…All very collateralized…I did an evaluation of all the loans I have done over a 3 year span…The only loans that gave me any real problem were the ones with the lowest % of skin in the game from the borrower…Not that its any surprise,but when the borrower had significant equity/money/skin to lose (of their own) they always found a way to pay off of the loan…Give these people a way to stick it to you and they will…Thats why I rail against ARV lending…Its the new/old %100+ financing…
Real Estate investing involves the purchase, ownership, management, rental or sale of real estate for profit. The main advantage is having invested in low cost estate can bring you more profit in the future. If you invest first time in Real Estate with your own money than you must investing lee of your own money in real estate.
Real Estate investing involves the purchase, ownership, management, rental or sale of real estate for profit. The main advantage is having invested in low cost estate can bring you more profit in the future. If you invest first time in Real Estate with your own money than you must investing lee of your own money in real estate.