Rental Property Investor · Houston, TX · Member since 2019 · 212 posts · 149 votes
I found a good 3plex deal in a A-/B+ area of Cincinnati, OH. I don't want to wholesale or flip the 3plex deal that I found on the MLS. I don't have enough cash for downpayment. It's not a rehab gut project but the rooms need minor repairs. My final goal is to turn the property into 3 different airbnbs starting in 2021. What are my options? 1. Hard money loan at high interest rate so that I can offer al 100% cash offer to seller?
I found a good 3plex deal in a A-/B+ area of Cincinnati, OH. I don't want to wholesale or flip the 3plex deal that I found on the MLS. I don't have enough cash for downpayment. It's not a rehab gut project but the rooms need minor repairs. My final goal is to turn the property into 3 different airbnbs starting in 2021. What are my options? 1. Hard money loan at high interest rate so that I can offer al 100% cash offer to seller?
2. Private money? I've never done this before.
3. Other ideas?
You do not want to use hard money for a long-term property. Hard money is for short term flips only. Your best bet is to find a private lender or ask for owner financing for the entire project or just the down payment.
I found a good 3plex deal in a A-/B+ area of Cincinnati, OH. I don't want to wholesale or flip the 3plex deal that I found on the MLS. I don't have enough cash for downpayment. It's not a rehab gut project but the rooms need minor repairs. My final goal is to turn the property into 3 different airbnbs starting in 2021. What are my options? 1. Hard money loan at high interest rate so that I can offer al 100% cash offer to seller?
2. Private money? I've never done this before.
3. Other ideas?
You do not want to use hard money for a long-term property. Hard money is for short term flips only. Your best bet is to find a private lender or ask for owner financing for the entire project or just the down payment.
Do you own other properties? Use them as collateral as your down payment, some banks may do that and put a 2nd lien on that property allowing you to put down less money on the 3plex
They would use the collateral (equity) in another property, usually with the same principal as an equity line. They do not actually take the money, but hold the lien or 2nd position mortgage, should you ever sell that property with the lien on it, they may either want that amount or ask you to switch the lien to another property, if you have a 3rd. I have actually bought property with no money down using this, another thing it does is help protect the equity in your property by showing that there is a 1st and 2nd lien on it.
@Patrick Liska I'm considering doing a HELOC on my 4 unit multi to be able to make down payments on 2 more investment properties, is that the same concept?
Partnering is the first thing that came to mind as other posts have indicated.
Next thought was can you house hack it? Owner occupying a unit can get high LTV financing. It would also make it easy to work on the units to get them ready to STR.
@Kate Barry I have never done it to purchase 2 properties, but maybe a lender will work with you on that. what you are doing is using the 1st house as collateral. say you have a 200K house, you have 100K in equity, most banks will lend out 70-80% so lets say 70% of the 100K equity, so you would have 70K to use. you find a property for 350K then you go to the bank and say you would like to buy the property but use the 70k in collateral from property 1 as the down payment, they then put a 2nd position lien on property 1 and lend you the full 350k for the new property, so now your mortgage is the full 350k and you have a 70k lien on the 1st property. should you fault on property 2, you will be forced to sell property 1 to cover the debt.
Partner Partner Partner! While yes owner financing would be amazing, but on the MLS not very likely. Private money is also great, but will be difficult for someone to lend privately at a high LTV, just like banks private lenders want to see you have skin in the game. Bringing a partner would give you the ability to have more expertise on the deal and someone to bounce ideas off of. This will also open the opportunity for your partner to bring you in on deals in the future! Good luck!
Hi @Susan Tan, I'm in Cincinnati and if the deal is good and in a great area as you mention, there will certainly be people looking to partner. I can send a DM if you want to discuss details but for the sake of the forum I'll share things to consider.
1. How much money do you need? If you need a smaller amount (say $50k or less), consider seller-financing or a private loan in a second position. Also be sure to have reserves as you want to prepare for any deferred maintenance as well as any residents that may not pay rent.
2. How much value can you create? If you can create a considerable amount of value you can refinance and pay off the lender and keep the asset.
3. Is it still available? Unfortunately, if it's really a deal on the MLS, it may already be too late. These things go fast and you need to find a way to lock it up before someone else gets it. I'd suggest putting in an offer and figuring out where to get the money.
4. It looks like you're in SF Bay Area, how do you plan to manage the asset? Consider partnering with a local PM or another local investor.
Lastly, it's worth noting that anyone with a self-directed IRA can lend you the money - you can even partner with your own SDIRA.
They would use the collateral (equity) in another property, usually with the same principal as an equity line. They do not actually take the money, but hold the lien or 2nd position mortgage, should you ever sell that property with the lien on it, they may either want that amount or ask you to switch the lien to another property, if you have a 3rd. I have actually bought property with no money down using this, another thing it does is help protect the equity in your property by showing that there is a 1st and 2nd lien on it.
@Susan Tan, you've already received some great advice. I agree with @Greg Dickerson and @John Casmon. Find a private lender that is willing to loan you the amount needed for a down payment and the immediate repairs. You can pay them off over the first 5 years with interest and a large lump sum at the end of the 5 years. If you can't find a good private lender, I think your best option is to partner with someone that can bring the necessary capital. This way, you don't have to worry about paying them back in short order because they'll just enjoy the cash flow with you.