Best Way to Finance Off Market Deals

[Allison Christine]

Happy Monday BP Community! 

I am sooo excited to be getting closer to making my first deal. I am targeting SFH or duplexes (house hack) ideally to BRRRR.
In my market, MLS properties are flying off market over asking price. I have been diligently driving for dollars, noting properties to target and compiling my cold call list.

My question is, because I am searching for an off-market property, what type of financing would be best? When I make the owners an offer, do I need the leverage of having hard money?? Because I am a first time buyer, I was planning to use the FHA loan for the low down payment, but am concerned with that approach when not using a realtor and the MLS.

I also have a family member willing to lend me 30k of there 401K but hesitant to accept. I have 20K saved up to MAKE A MOVE.

Thoughts??? Thanks all!!!

[Ryan Blake]

@Allison Christine Great questions here.

First off, not sure if the $20k will be enough or not. It really depends on the area and grade of home your are looking for. If you are looking for a duplex in an A class neighborhood, it may not be enough even in the cheapest markets. It will also depend on the reserves your lender may want to see. I am always wary of borrowing money out of a family member or friends 401k. That can go wrong in many ways.

As for Hard Money vs FHA. Hard money offers will almost always look more attractive in that they are same as cash financing and can close quick without required inspections and the like. The downside for househacking, hard money lenders are NOT allowed to lend to owner occupied homes because they do not confirm to Dodd/Frank lending laws. Most lenders will make you buy in an LLC so that it is not officially owner occupied no matter what but will make it a little more difficult to do a refi into long term debt or they will make you buy in your name but sign an affidavit that you will not occupy the home. FHA loans will fund some rehab amounts but mostly cosmetic rehabs. If there are structural issues, it will be VERY difficult to close in an FHA loan. It does allow you to get into the loan with just 3.5% down which is very nice and has a low interest rate right off the bat.

Good luck with this search. I hope my thoughts help a little.