Hard money lending without down payment?

Question

Hi BP Crew,

First time caller, long time listener and new BP member here.

The backstory: I have submitted an offer on a rehab through the MLS that my buyer agent (who is also the sellers agent btw) says the owner will most likely take the offer. Once accepted, I've been planning on assigning the contract but my cash buyer doesn't like the deal as much as I do. I personally love the deal and I'm considering taking on the project myself.

My question to the community is:

Is there a way to borrow hard money without a downpayment? From the information I've gathered, most hard money lenders require a downpayment of up to 30% of purchase price. Any advice would be much appreciated.

Bob Stevens · Answer

Sorry no. They are all going to want you to have skin in the game. If your experienced buyer doesn't like it , why do you think its a good deal? You better know your numbers.

Jay Hinrichs · Answer

very rare for first time borrowers or first time clients.  once VERY well established 100% financing is there for the very few that qualify

Ash Hegde · Answer

It's possible to get zero down for highly experienced flippers with a good relationship, but I am not aware of one that will do this without a lot of experience. 15-20% of the purchase price is the norm for the first few rehabs.

Abram Torres · Answer

@Benjamin Emery

You defenitly can use other strategies such as getting a private lender to fund the down payment and take second position.

Benjamin Emery · Answer

@Luka Milicevic Thank you for your comment. My agent is in fact the buyer agent and the seller agent for the property. It's technically legal in Washington State but most real estate agents won't provide dual agency for obvious liability reasons but I always ask when submitting an offer through the MLS, although I never want to endanger the agent or request favorability in any way.

Sounds like I need a stronger resume to receive a HML or to piggyback off of @Rob Beeman, if I can find a great deal where the rehab can be completed within 65% of the ARV then it seems lower risk. Man I freakin love this stuff.

Rob Beeman · Answer

@Benjamin Emery Benjamin, to answer your question, I used other people's money along with mine for years of flipping and then rehab lenders appeared on the scene. Many have adjusted their guidelines through the years and many have stopped lending at times (during the 2007-2012 messy times & during the pandemic), but I try to be selective in pairing up with resources, especially when it comes to committing funds to a project. So I pair with lenders that have never stopped lending, even in changing/uncertain markets.

Since I stopped rehabbing I focused more on learning the lending side of the business including on commercial assets. So, I aligned myself to be part of two lending teams, one (DLP Capital) that focuses on lending to experienced multifamily operators of 200+ units held, seasoned higher volume flippers & builders that turn 45+/year. The other (Rehab Financial Group) focuses on purchase & rehab financing on 1-4 unit properties in 30+ states. The lending product produces a loan amount that is either 100% of the purchase & rehab amounts OR a percentage of the ARV, WHICHEVER IS LESS. For lesser experienced borrowers (0-2 deals completed in the last 3 years) that percentage of ARV is 65%. For experienced investors that have 3+ completed deals in the last 3 years that percentage of ARV is 70%.

If a borrower can work the deal to have all of the purchase & rehab amounts fit within 65% of the ARV for lesser experienced OR 70% of the ARV for experienced borrowers, then 100% financing is accomplished. Is that easy to accomplish? Maybe, it depends on how the borrower buys their properties & how aggressive they are on negotiating the purchase price. When I was buying I realized that the purchase price was the figure that I had the most control over and was the most important figure, so I became VERY aggressive at negotiating the price, which meant often I was buying off-market properties and usually the only offer on the table.

I believe that BP prefers to not promote services here in the Forum, so I would be happy to chat in messages or by phone outside of the forum to see if financing is a fit for your projects, Rob.

Eliott Elias · Answer

There are 100% financing and rehab lenders, they want to see experience.

Christopher Davis · Answer

Just to chime in. I own and operate a private lending company on behalf of our family office and we almost always want 15-20% down for purchase. We have done 100% of purchase on super low LTV deals or with a very strong borrower.... but it's rare.

There are ways to get to 100% of purchase but it involves things like cross collateral, pledging securities, etc.

Sanat Bhandari · Answer

@Benjamin Emery Those options exist but you gotta be vetted for the same, whether that be through experience or another investor vouching for you

Keep in mind too that the terms on those options might not be the best if they're funding 100% of the purchase price

Luka Milicevic · Answer

@Benjamin Emery

More than likely the agent is not your/the seller's agent. They are maybe facilitating the transaction, but I don't think they are representing both of your best interests.

In terms of no money hard money. It does exist, but I've only seen HML being given with zero down after an investor has done several deals and proven themselves.

Personally, my HML experience has been 10% down. I have one lender that I have never used that does 100% financing, but he is so expensive that it is near impossible to find a deal that will carry those holding costs.

Hard money lending without down payment?

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