Running out of Down Payment $$$. Any suggestions?

[Will Gaston]

Hello All,

I am a "Buy & Hold" investor that has been buying rentals for 8 years now and I own 18 properties (SFs & duplexes) with the average property worth ~150k. I'm looking to buy more, however it seems that every type of lender wants the investor to put some type of down payment (and rightfully so, of course).

But I will soon be to the point where I am unable to put down 25% without putting myself at a liquidity risk.

A few notes on what I've found:

-Hard Money lenders seem geared perfectly for flips but not for long term rentals. They seem focused on ARV's while many of the rentals I buy don't need more than 5k-20k in repairs. They usually have 20k-40k in equity before I do anything, but my repairs are usually cosmetic and don't add a whole lot of additional equity.

-My local commercial lenders seem eager to lend as long as I put 25%-30% down for each property. So for a 150k property that could be 40k-60k after repairs.

-I'm probably going to have to wait another 18-24 months to refinance my current notes so I don't think taking that cash out is an option either.

-I've gotten 1 or 2 sellers willing to carry back a 2nd mortgage, but those are few and far between.

Does anyone have any ideas as to what I could do? Short of using a credit card, of course. Is it even possible to get a second mortgage on a commercial loan?

Thanks!

[Bill Sargeson]

My local bank that finances all of my rental properties gave me a line of credit on one my houses and all of my loans are commercial loans. This might be an option if you have a decent amount of equity in any of your properties. I utilize the line of credit to use as down payment money, then pay it back with my monthly cash flows and start the process over again.