Is 100% financing a thing?

Question

Whether you are flipping houses or wanting rental properties, are there lenders that will lend you 100% of a deal and take the deal itself as collateral? I Don't have much cash to work with, so I'm trying to figure out my options.

Ko Kashiwagi · Answer

Hi Josh,

If it exists or not, yes it exists. But it usually only comes in 2 forms:

1. The lender is an individual, private and has great relationship with the borrower + borrower has a lot of experience

2. It requires the borrower has significant experience and is very costly (in terms of rates/origination)

It's generally really risky to do 100% financing especially if you are inexperienced. One mistake and you can be completely under water. There are programs out there that finance 90% of purchase for first time borrowers. The 10% different seems small but it can make the difference between getting foreclosed or not.

Nicholas L. · Answer

@Josh Leigh

it depends.  wholesaling is difficult, and the best wholesalers spend tens of thousands of dollars on marketing to generate large numbers of leads, because so few leads are actually going to close.

i did a little bit and we'd convert about 1 out of 80 leads.

now, do you need a huge marketing budget?  no, but if you don't do lots of marketing you'll have to put in tons of time.  can you drive for dollars 20 hours a week and make your own list and then spend the time calling or mailing it?

Nicholas L. · Answer

@Josh Leigh

there are different ways to answer this question... but if you don't have much cash to work with, just save up more cash.  even IF you could figure out a way to borrow 100%, that means 1 hiccup and you're in dire straits.

what happens if a flip takes longer than expected?  what happens if a rental needs a new furnace and a new fridge?

you need cash / liquidity / reserves.  there's just no getting around it.

happy to help with other questions as well - i just get nervous when new investors try to borrow 100%.

Marc Greger · Answer

I personally prefer when investors have some skin in the game. But there are times when you run across a very good deal but have all your working capital already tied up, so you need extra capital to get in the deal. Or when you want to scale your business, where you finally have a reliable experienced crew in place and you want to do more deals at a time. We have a solution for that, but investor and deal need to qualify. Feel free to reach out I´m happy to connect

Anderson S. · Answer

100% funding is a thing, for example, if the home is $100K to purchase and the renovation is $75K a lender can give you the full $175K however, there are two things you'll need to be aware of 1) there's an option where the closing costs and fees will be much higher, OR 2) you could give your lender a percentage of the equity of the deal (30% - 60%) for a truly zero personal investment deal.

Ali Radoncic · Answer

Some lenders can do it but you will still come out of pocket.  For example, they can finance up to 70% of the ARV meaning, if you have a perfect 70% deal (purchase price and rehab are withing 70%) they will cover those cost for you.

you will still incur closing cost, taxes, and insurance cost though for example.

True 100% financing (ZERO out of pocket) typically requires solid relationships with private lenders or a combination of hard money lender and private lenders.

Erik Estrada · Answer

Yea I agree with @Doug Smith. So many people are concerned with putting as little money down and have no equity in the deal. Once the market shifts (like we are seeing now) and appraisals start coming in low, lending becomes tighter, it will be much more difficult to have an exit strategy.

I am seeing more and more investors having difficulty selling their property and refinancing them since they are highly over leveraged.

Doug Smith · Answer

Please be careful, at higher amounts leveraged, the carrying costs/time value of money can eat you alive if you have any hiccups in your project. After seeing several "market crashes" of varying degrees, an experienced lender will not lend 100%..particularly on a non-owner-occupied investment. If they do, they probably weren't around in 2007-2008. It's nothing against you, but right before every single real estate market downturn, I've found that investors start to say two things: 1) real estate will never go down and the market is strong, & 2) I'll lend at 100% or even more or as a borrower, I need 100% financing. Those are the sacrificial lambs in a market downturn. I would, instead consider a partner with capital and perhaps experiences and skillsets different from those of your own. That might limit your exposure to having interest eat up your profit and might increase your success chances by bringing on complimentary wisdom while you hone your craft. I wish you well.

Carlos Ptriawan · Answer

100% financing is a thing because lender want to take over your project/asset for cheap ; put it that way.

Is 100% financing a thing?

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