General questions - conventional and private lending

[Josiah Collins]

Hello everyone! I'm still pretty new as a real estate investor and I had some basic finance questions. I'm also open to any and all advice! I currently own one rental and I'm looking to expand. I tried reading through a few pages of posts and couldn't find an answer to my situation. I've come across a pretty good foreclosure deal on a fourplex and the numbers look very good. Now I'm getting to the point where I'm trying to see if/how I might finance it. First, are there ever scenarios where a bank will finance a foreclosure with 20% down? The property has been vandalized but all of it is surface stuff. Mostly just need to replace drywall and paint, new carpet and some minor bathroom repairs. I'm concerned the appraisal wouldn't come in high enough though. The other part of this is if I had a private lender loan me the down payment, can I do that? Does that impact the likelihood of getting the main conventional loan? The idea would to BRRRR this property to pull out the down payment and some of the rehab costs. If I do a private loan, would that be an unsecured loan or is there a way after the property is purchased to tie it to this loan so they have extra security? Any and all advice is appreciated! Josiah Collins

[Brian Garrett]

Originally posted by @Josiah Collins:

I spoke with a loan officer that I worked with before and wanted to relay some additional information to see if that generates different advice. They told me that I should be able to do the normal 20% down, but since I don't have that amount and was planning to borrow that for a family member I would have to have that money in my account for two months before they could count that? Otherwise she said I could actually have that second person on the loan. However, I don't think that they would necessarily want to be on a loan. Is this a standard practice? How aren't people doing it when I see people talking about using a hard money loan or private lending for their down payment? Am I missing something? Thanks!

Yes that's correct and most people aren't using HML's for down payments they are using them for value add deals where they can force immediate equity through rehabbing and then refinance out into a better loan program.