hard money lender down payments?

Question

Im new to investing and would like to fix and flip along with some brrrs. I would like to have 100% equity in the homes but dont have much capital, would I be able to get a 0% down or maximum 3.5% down for a hard money loan.

Chris Seveney · Answer

@Rena Figures

You have two big strikes against you. No experience and no money. With only 3% down what happens if you end up losing money?

A lender is not going to lose money on a deal for you to gain experience

You will need to partner with someone to get experience and at the same time start saving

To answer the other question you typically will need 20-30% down to get hard money

Erik Estrada · Answer

For a first time investor you can expect to put at least 30% down. Once you get some experience you can leverage up to 95%

Edwin Epperson · Answer

@Rena Figures just to be clear you want to have 100% equity but you are looking for a loan?  Genuin question, does that mean 100% of available equity you want to own 100% or ... you want to own the asset free and clear 100% of the value is owned by you?

Celia Lumbroso · Answer

@Rena Figures if you only want to put down 3.5% down payment, then I strongly advise setting up an LLC and incorporating 4-5 other like minded individuals that have the same goal.  At 3.5% down payment you would most likely be a passive investor with the other members having majority ownership of the LLC.

As others have stated, need at least 30% in reserves.

Devin Peterson · Answer

You'll need to partner up with another investor for the experience and to build up some more assets. I recommend marketing yourself to other investors out there on your strategy and goals to find someone to partner up with.

Mike Klarman · Answer

As a new investor, your product choices are limited.  For the lenders that do a 0 with decent credit you will need to put down 15% - 20% on a bridge loan and that's with 720+ credit.

More than that though, you need to understand the capital requirements.  Downpayment, closing costs, holding costs (loan payment, utilities, insurance), money to front the contractor to get started (you get back after the rehab is done).  Even on small deal you need 25k in capital to see it through to the end.  You'd like your aftertax return be about that same 25k or whatever the float was.  You'd like to get a 100% Cash On Cash return and do it in 5 months or less.  I did one this year in 90 days for a client.  Bridge loan closed for him and 90 days later he was closing on the sale.  Create an environment where you can 3x - 5x ever year.

Doug Smith · Answer

It would have to come from an individual. An institutional investor or a hedge fund is going to want some cash down. A lot depends on the experience of the operator. For instance, we'll usually go fro 75% of the cost plus rehab budget for a "newbie" to 90% for someone more experienced. That's about as aggressive as we're going to get, but you might luck out and find a local individual that will to it. I wish you luck in your ventures.

hard money lender down payments?

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