Skin in the game for Buy and hold

[James Martin]

After researching different ways to finance a Buy and hold, it seems like the better option would be to use a hard money lender.

the only issue I face and also a majority of new investors deal with,  is the lack of skin in the game. I have never owned a home, so I have

no real assets to put up to be approved finance through a hard money lender.

so my question stems, should I use a FHA loan for my fist investment (and home) for a buy and hold property , and then later utilize a hard

money lender for additional Buy and hold investments?

are there better ways to show skin in the game for hard money investors?

any suggestions would be appreciated! 

[David Weintraub]

Your "skin in the game" is your downpayment on the property you're investing in. Whether you've owned a home, or not, isn't even a factor. Neither is your DTI, etc.

Lenders will look at your credit.  Some have a credit floor, of say 600, but others just look at it to see "why" your credit score is what it is.  It could be 520.  If the reason is you didn't pay a mortgage, or a constantly late on CCs for no reason, then they'll probably balk.  If it's because you had good credit, faced an emergency medical issue, maxed out your cards, but are working to pay them back, then they very well might.  

It's like applying for a job, and both the investment property, credit, bank statements, experience, all that is part of the resume.  That's one reason I appreciate Fortune Builders - most of their students approach this like a job, and when they send you a proposal, it's DETAILED!  Btw, I'm not promoting FB.

If it's a flip into a hold, you'll need anywhere between 15-30% of the loan amount on your end.  If the loan is $100,000 to purchase and $50,000 to rehab, with a lender giving you 85% of purchase, 100% rehab, you're going to need approx $25,000-30,000 to do your part of the loan, and the rehab. 

If you're flipping into a buy and hold, and the ARV is $200,000, keeping above numbers, then you can get a lender to give you longer term financing after some "seasoning" of 2-6 months (unless you're using delayed financing, which is all cash, then you cash out more quickly). Say the go for a refi, and get 70-75% of the ARV, now you're getting $140-150,000 back out, which you'll use to pay off the original Hard Money Loan.

I'm making this scenario look pretty, tight, and nice for the sake of ease, but that's the gist.

There are points, fees, interest payments, etc along the way.

But regardless of where you live, whether you own a home, or even have a job, if you can come to the table with a good deal, that fits the lenders numbers/expectations, and you have the financial capacity to do the loan, the loan you will do...