Confusion with financing

I am a newbie of sorts and have been reading and soking in the information on this site. I think I have reached overload though because I feel like I am reading contridicting information now.

I have been dealing in what Steve Cook refers to as the outskirts of the combat zones. The ARV’s of most of the properties I look at are around $50 to $80K and usually I see them offered for between 40 to 50% below that and most of them take less than $10K to fix.

My confusion is with financing;
I have read on here that HML’s, banks and other lenders do not like to do residential loans for less than $50K but then I read another post and someone, sometimes the same person that said no is referring an investor to an HML or other lending insitution. Do they or don’t they lend below $50K?

I read another post that advised someone to get an HML for their financing so that they could go into closing with a cash deal and then later read that HML deals are not considered cash deals. Which is it? If it is not what is considered a cash deal when using other peoples money beside a loan from a realative because it would seem to me any other lender is going to want the property as collateral.

my head is spinning and I am looking at some deals that I will need some financing help but I don’t know which way to go now. They are deals like above.

Breathe. Count to 10…

Steve Cook has never been in combat therefore he wouldn’t know what a combat zone is or the outskirts of one and thus would have no business describing such a thing.

Most lenders draw the line at 50k. Some do go lower, most don’t, you’ll just have to look around. It’s not written in stone that a RE lender can’t go below 50k. For significantly lower than 50k, you might have an easier time getting financed if you got a personal loan of some sort just to make your searching a little easier.

I define a “cash” deal as one where the money is either coming from me or another loan, NOT seller finacing or sub2. This is typically the consensus in the RE world but you’d have a hard time finding the term in the dictionary, therefore no one will stop you from making up your own definition. In a slightly different context, a cash deal could mean actual cash from your pocket or a previous arranged financing such as a HELOC, LOC, etc.

You might have an easier time buying several of those cheap properties at once and financing them in packages or atleast bringing several to the lender at once. HMLs are flexible, bring something to the table that makes money for everyone and they will work with you.


Your saying that an HML will group the properties together and consider them as one property for the financing? Will banks or other lenders do the this as well? Is so how does this effect the resale if I rehab and retail or refi if I keep them?


You can certainly hard money lenders to loan amounts under $50K. The key is to make sure the property appraises for more than $50K ARV if you plan to flip. If you are going to refinance and cash out some of the equity, the ARV will have to be even higher as banks typically cash out up to 80% of ARV with very few going up to 90% if you go full doc and have excellent credit.

I am closing on a property that I am buying for $27K with $3.5K in repairs next week. I am using hard money to finance the purchase and fix. I was hoping to hold on to it for rental, however, I am unable to find a bank that will refinance under $50K. At 80% of the ARV, I’d be asking to refinance roughly $44K and I can’t find anyone to do it in North Carolina.

Instead, I will put the property back on the market in March and sell it retail for $53K - $55K.

Yes thats the problem with low priced properties banks just dont want to play. They have so much overhead that it just doesnt pay for them to go out on a limb for 20k. I have an hml that does loans as low as 20k but as far as a mortgage bank some will do 30k, last time I knew bank of america will do as low as 20k and it all depends on the program. I just ran into a similiar situation where I bought a property and rehabbed it all for 39k total. I have it fully rented now and have owned the property just over 3 months. Now you get into seasoning requirements (hogwash) and that also limits the banks. It has been hard to find a bank to go 90% stated. As a matter of fact we are ending up going 80% stated (or so they say as of right now) and that will pay off our hml loan and give a couple thousand in pocket and a great monthly cash flow which is what I want…Good luck Banks are tough to deal with and one of the hardest parts to deal with in real estate investing.

As other posters have indicated, although the bar has been set at 50K by most HMLs, there are programs that allow for a lower loan limit (I am aware of a HML program that allows for a min. of 30K).

If you have a mid FICO is =>640, there is a conventional loan program that allows for 80 ARV, no min./max. loan size, high debt to income allowance (as high as 50) and can be used on SFR, duplexes, triplexes and fourplexes (townhouses and condos are allowed to 70 ARV/FMV).

What you are looking for is available; good luck!


Scott Miller

Thanks for the info everyone.

I guess this is just another one of those grey areas where it seems to depend on who you are working with.

There seems to be a lot of grey areas in REI; seasoning do you need it or not, loan limits, creating a business entity, using a management company, hard money vs private vs institutional which is best, and more.