how are people able to get deals with little to no money down?

Question

My wife and I are Looking to buy either a 4-plex here in Baton Rouge, La where 3 of the units is rented out and the other unit needs a complete rehab for $250K. The local bank here says don’t buy/look at any properties that will not generate income upon signing because that mean we will be paying on something out of pocket before the property can make money.

The other is in Tennessee for $860k the seller of this 1 bought it then fixed it up a bit in Jan of this year and now wants to sell it. The bad thing is he has no lease agreements in place even though he has it 100% occupied with the tenants paying month to month. The local bank in TN don’t want to lend because he can’t provide a rent roll to see the numbers to make sense of the deal.

My question is how are people able to get deals with little to no money down if this is their first time buying in real estate with all of the many people on this site including the Host saying it’s possible but the lenders are saying that, that is untrue it will take some amount of money down. We have $30K in cash on hand to start this train rolling, it may not be a lot to some but we’ve been saving up several months to get to this amount with all of our normal expenses with our current living situation. I’m not sure if I’m taking on something to big to soon or have false expectations about the whole little to no money down lingo Not saying I don’t believe David, Brandon, Rob nor any of the other people on here, we are at a stand still because its unclear what I’m not understanding what routes to pursue. I guess what I’m getting at or saying is who did their funding so I can link up with them…?!?

Rick Pozos · Answer

You really want to know how to do this??

You find a distressed seller who is going to sell way below market price. You rehab the property and create value. Also, you have friends or family or someone's Self Directed IRA lend you 100% of the purchase AND rehab.

Let's say you buy an UGLY 4plex for 200k. It needs 100k repairs, but it will be worth 400k after fixed up. You borrow 300k from someone who knows and trusts you (NOT the bank, not hard money, not a regular type of lender). Now you have a property that you owe 300k and worth 400k. Go to a regular bank and refinance it. That is the equivalent of 25% down. You have 100k in equity. You can sell or refi.

Aj Oxley · Answer

@Bob Stevens oh ok, I follow you now. Yea with the $860K I’m not going to pursue that from what Account Closed stated he do not have his paperwork in tack.

Aj Oxley · Answer

@Josh Young I’m unable to do this with my current living arrangements.

Account Closed Thanks for the heads up, I have a meeting with them on Tuesday so ill let them know I’m not interested.

@Ke Nan Wang I’ve never heard of Pace Morby ill do my due diligence to read up on this.

@Amir Khan I was thinking about doing that with the 4-plex in TN since all 4 are livable and I could get a lower out of pocket down payment.

@Jonathan Taylor  I’ll definitely check out that option as well, I just didn’t want to think that all the no/little money down was for first time investors was my way to go at this EVEN THOUGH I would love nothing more than to keep all the cash we’ve saved up and put it into the property itself.

Account Closed · Answer

No rent roll or proof of funds is usually a bad sign if the owner is claiming income/tenants. Also, realistically going to be borderline impossible to get an $860k property with $30k in cash. Especially if it's 3+ units, and you'll need reserves as well once you're owning multiple units.

Aj Oxley · Answer

@Bob Stevens Are you replying to no lenders/funding…?!?

Aj Oxley · Answer

But again are there any lenders/funding for new investors that understand this is our first go round…?!?

Bob Stevens · Answer

there not, simple response

Ke Nan Wang · Answer

Most people here who are saying it's possible to deals like this because they have access to private funds or they can negotiate some kind of an owner financing deal.

Definitely not your conventional way of getting a bank loan.

When you want to bring private funds into a deal, you can either give up equity or borrow the money on a note and pay them back if you can afford it. Either way, there needs to some trust and relationship established prior.

It seems like maybe a Pace Morby people can help you. But you do need to pay a steep tuition to get into the program. I've never used them before but have heard many good things about them. Maybe worth to look into. I believe last time I check it was like around $3000 to get into the program and you can have access to many people with resources.

Jonathan Taylor · Answer

@Aj Oxley little to no money is hard to achieve as your first purchase of a multi family house hack 3-4 unit. Also, 3-4 unit for house hack conventional require 15-25% down. In these cases, unless you have a family member willing to put the rest of the money down, these deals wouldn’t work.

You can look into the NACA program but this program takes time and is not a fast moving loan.

Keep at it and continue saving.

how are people able to get deals with little to no money down?

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