john, thanks for the reply. I would like to know who will give you a loan at 80% ARV? Are you talking about a 'hardmoney" lender or a traditional "wholesale" lender that typical mortgage brokers use? Most hard money is capped at 65% of ARV...some will go to 70% ARV w/ a high credit score and a track record or several hard money loans. ..
Actually, here in Southern California, there are a number of HML’s that will do 75% and I know of one that will do 80% if the situation is correct. The HMLs would get very little business here if they only did 65% - 70% simply because of the cost of real estate here.
Skydivecock,
There are plenty of ways to use other people’s money in real estate investing. I’m worried about the reason why you ask if these deals can be done. People with good credit and who have researched their options and put together an experienced team can do no money down deals or even cash back at close. In the final analysis, all real estate investing is business and all business must involve a degree of risk. To cover this risk, reserve capital should be on hand. If you want a no money down deal because you have no money, you are setting yourself up for failure. I have been offered fairly large sums of money at close for properties that were questionable, and I didn’t buy them because I didn’t like the way the rest of the numbers looked. Just be careful, dude.
There are three true friends: an old wife, an old dog, and ready money.
I also use a local bank that loans 80% ARV. I deal directly with the president and vice pres of the bank. These local banks are a valuable asset to communities. They offer loans that are otherwise tough to find, short of using hard money. I have established a realtionship with my bank, they trust me now. In fact they have come right out and told me that they will disregard the due on sale clause in contracts with me based on our past transactions.
They allow me to submit my own estimates for repairs without oversight, do not inspect at intervals and generally let me take care of business without interferance.
I guess the point is: Establishing a reliable and affordable line of credit may be better than seeking no money down deals for your real estate endeavors.
That’s exactly what I have. A local bank and I also deal directly with the vice pres. They are awesome I love them… They trust me and know I do quality work. They don’t worry about their and they don’t intefere with the project at all. I make my monthly intertest payments and all is well. We have an awesome working relationship and trust each other to the hilt.
If a mortage broker can get you an 80-20 mortage for 100% of the ARV, then why can’t they get you a loan for 100% with the other 20% in equity? For example I buy a house for 80k that is appraised for 100k? That is an 80% LTV which is not different that the 80-20.
Why in the hell would you want a loan for 100% of the ARV? If you have the intention of making a profit, try not to be in debt of 110+%. That’s why you can’t get rehab loans that high. If you can’t profit with conservative numbers, how will the lender make any money if/when you screw up causing a foreclosure?
REI Hustler/Bob,
Can you clarify an earlier comment for me? If I read correctly, in your hypothetical situation you asked for a 6/12 month option so that work could be done on the house. Is it possible to work on a house that you only have an option to buy? Wouldn’t this be risky or am I misreading your statement.
Thanks,
Buck
While it is possible to buy a property with no money down, it is very difficult to run a business with no money and no credit. To be successful under those circumstances, everything must go right. That is seldom the case in the real world.
Ah, that's why you should accumulate as much cash as possible via birddogging or wholesaling, yes?
You don’t need as much cash as possible. You simply need a reasonable reserve of either cash or credit. I’d say that a few thousand dollars ($4,000 - $5,000) is plenty if you’re buying one lower priced single family rental and if you understand the numbers for your deal.
I don’t know anyone who had many any significant money birddogging. Of course, it is possible to make money wholesaling, but I would always be prepared to close if you can’t wholesale the property.
Yes, one way to get out of a contract is to weasel out of it with a clause. However, once you fail to perform on a few contracts, the word will get around that you’re simply a wannabe. Serious investors close on their contracts. Reputation is very important in any real estate business.