Creatively Creative Financing Questions

[Jared B.]

Hi everyone, my name's Jared and I'm an admitted real estate noob looking to dive in real soon. I'm waiting on the BP creative financing book in the mail right now, but have learned enough to have some level of understanding on seller financing. Anyways, I've found what appears to be a great deal with the potential to bring in over $1K a month by itelf after expenses, but I don't have the money for a conventional down payment. 

So, time for my question. I've been told that seller financing is pretty much out of the question if an agent is involved simply because of the assumption that they won't get paid. However, isn't it possible to negotiate terms of sale where the agent is still paid the same amount as if the deal closed in standard fashion? Can't I negotiate terms where the sellers pay their agent, and I still finance through the seller?

Second question, if I negotiate for the seller to cover my down payment through the bank, are they required to have that cash directly on hand? In other words, is it legal or practical for them to get a loan from one bank for say $40k to pay my down payment at another bank? Otherwise I can just try talking them down $40k, but that still leaves me with a down payment I can't cover. Any thoughts?

-Jared

[Jake Hartnett]

It sounds like you need to do some more research before you jump into a deal. You are having trouble with the 30,000 ft view, which means there is a ton of detail work that you need to book up on. Study before you jump into anything.

With BRRRR you generally need to be prequalified with an institutional lender before they will give you any money. They want to know that they are going to get paid off, unless they are the kind of hard money lender that wants you to default, so they can take your property. Some hard money lenders are just acquisition pipelines. Be careful.

Theoretically the equity that you build when you rehab the property will be your "down payment."

Example:

$200k ARV

70% LTV (of ARV)

$140k hard money loan

$90k purchase price

$50k rehab

Refinance at $200k value into 30 year fixed, They will only loan 70% LTV so the $60k difference between what you owe your hard money lender and the current value is your "down payment." Lenders don't require a down payment, they just wont lend over 70% LTV (or 75% or 80%).

If you didn't qualify for a loan before the BRRRR, you wont qualify afterwards. Work on your credit score and start making more money, save some money and keep researching.

Even if you do a BRRRR you need reserves in case you go over budget, or cant refi as fast as you thought, or the property doesn't appraise as high as you thought. You probably want $30k just sitting there just in case.

Good Luck.