Is it better to have two private loans or a HML and private loan?

Question

I’m looking to invest in multi unit properties for long-term buy and hold and would need help financing. I’m hoping to get it 100% financed, but I know lenders have a maximum LTV which I think can possibly be between 60-80%. However, I would need to somehow come up with the remaining 20-40%. I was wondering if it would be better to do two private loans or one HML (first position) and a private loan (2nd position)

thank you for your help!

Account Closed · Answer

You'll probably get a lot of different responses here, but my opinion is, I never like being 100% leveraged. Some of the guru's talk and talk about no money down, yadda yadda, but that's just not the norm from what I've seen. Can it work though, yes, but have some skin in the game. Your financing should be based on your goals as well as your cashflow (after paying the mortgages, repairs, vacancies, etc.) HML are usually shorter term loans as well.

Jay Hinrichs · Answer

If you have no money now and no experience this is all a very big pipe dream.. @JD Martin Read JD's response a few times.. U need money to transact in RE.. other wise become an Agent or a lender and make fee's to build up your money bucket.

JD Martin · Answer

Exactly. I don't know how you're going to swing that anyway as you're going to need to have your DP when you come to closing and it's pretty likely, unless you have some seriously high assets and no debt, that the loan you take for your downpayment is going to kill your ability to get bank financing.

I assume your question means that you don't have any money of your own, to which my advice would be: go make some money first, then worry about trying to buy RE. Being broke and owning 100% leveraged RE is a very good way to be in a whole heap of trouble when anything goes south.

Erik Estrada · Answer

More debt is not the answer. Work on saving money and have enough for the down payment, reserves, and closing costs.

Being 100% over leveraged is a recipe for disaster. It may work for a few scenarios, but it is not a sound long term strategy.

Cam Schwartz · Answer

Hey Saleem. As @Jacob Sherman mentioned, lenders prefer and typically require to be the sole debt on a project (mortgage). If you're keen on buying real estate with little or no money down, you might consider taking out a HML for 80-90% LTC and syndicating the remaining 10-20% equity among investors in your network. Bigger Pockets is a great hub to network with investors. If you find an attractive deal, you should be able to pool capital and perhaps negotiate some 'sweat equity'!

Jacob Sherman · Answer

most lenders will want to be in 1st and only position

Is it better to have two private loans or a HML and private loan?

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