Need Help! Commercial Property & No Money Down Issue


I’m wondering if anyone can help me with this scenario. I’m looking to buy a apartment property which is has a CAP of 14%.

I’ve found several lenders that will lend on a CAP of 8%. So I’m thinking of increasing the contract price of the property by 20% to cover the downpayment and pay the seller 100% of his asking price and walking off with a property with a reasonable CAP.

The only problem is how I go about with the closing? How do I work around the fact that I will not be providing a downpayment at closing.

Does anyone have any ideas or suggestions?

Howdy Shahkarim:

Get some practice spreading your legs and putting your hands behind your back. This is what you may hear committing loan fraud. The appraiser may join in with you as well if you get him to alter the appraisal to justify the high value as well as the seller. It has been done in the past and I would not see any problem as long as you are getting the property cheap enough but where does it stop.

Be careful too if you use undisclosed seller second liens as well. If you do something like this you will probably need to show proof of funds to close in a seasoned account and you will probably not be able to provide that. Lenders went to school and have set out many new rules and fraud checks etc. By school I mean school of hard knocks foreclosing or fraudulent loans.


with a cap rate that high, you can get 100% financing but would still need closing cost and fees associated with the transaction.
An escrow loan can bridge the cost if the property can support it.

In all reality, The Lender will lend on the lesser of the two
(purchase price or appraised value).
100% financing doesn’t exist, but I can show you a way to get in with only 5% down, if the seller is flexible.

100% Financing does exist…even if the seller is not flexible, if the income can support the debt service…
There are so many funding sources available that think outside the box these days to get loans closed.

Yes, you can get the property with 5% down and most lenders do not care where the 5% comes from as long as it is not a secured by a mortgage. But, I think that destini may have a point. While I do not know of any commercial lenders that will do 100% it makes sense that if the dscr is above lets say 1.4 and the lender can use their own appraiser, why not 100%.

Here’s one thing to remember, the lender is an investor in your deal. They are showing up to make on money on the deal as much as you are, except they are willing to take a lesser return on their investment because their investment is protected by your (or your investor’s or seller’s second) equity position in the deal.

Ask yourself, “If the deal were so great at 100%, why does the bank need you?”

They’re really not in the business of investing 100%. You’ll need to get creative about structuring the other 20-30% down to make this deal fly. And if it’s really as great as it looks, you’ll have no problem putting it together because everyone will be making money.