How do I "capture" the equity in a purchase to use towards LTV?

[Tyler H.]

For all you investors that pick up property below "market value"... Is there a way to PURCHASE an apartment and utilize that "equity" as part of my down payment?

EASY EXAMPLE. 

REO Apartment that APPRAISES for 1M

I acquire for a purchase price of 900K.

So assuming I could find 80%LTV, and I HAVE 10%, Is it possible to use that extra equity for my remaining 10%?

I understand traditionally banks will go off of COST/PURCHASE PRICE if it is lower, but maybe others have experience / suggestions. 

If not, what solutions do  I have? Use HM or bridge loan for aquisition, wait 6 months, than refi?

THANKS

[Christopher Telles]

I've yet to see a lender allow any perceived equity in a property used as part of a required down payment.

Why? Because it's true value is what someone is willing to pay for it today, and even though it might have more value upon a resale the only value the bank can place on the property is what it is being sold for which is the price you are paying the seller.

HMLs may allow this, but you'll pay for the privaledge. This said, if the deal can cash flow the debt and buying a property using HML is the only way you can acquire it then it may make sense to buy it and then wait the required seasoning time required by your lender of choice and then refi.

Alternatively, if you are short say the additional 10% then you can ask the sellers to careyback 10% if your lender of choice will allow you to use that amount to qualify you at their 80% LTV., and many will allow you to qualify under such circumstances.

Then either structure a holding account to save to pay off the 10% owed to the seller by whatever call date on the loan you've negotiated or simply refi the property again sometime before the call date. Just make sure to include these additional refi costs in your  DCF analysis.