Thoughts on using a loan for a down payment

[Ryan Deasy]

Hello: I am getting ready to pull the trigger on another rental. After just acquiring a new personal residence, i do not have enough for a 20% down payment. What are your thoughts about using something like sofi or wells fargo's LOC, etc. to fund the down payment? this would not at all be part of a conventional financing deal. i understand the ramifications there. it would be part of an owner financed or hard money deal where they would pick up the remainder until i could refi into something more favorable. i guess it just boils down to the extra risk in that the property is highly leveraged, right? let's assume i am not buying it at a steep discount and the property would cash flow a few hundred dollars after debt obligations. Thank you in advance!

[Joe Villeneuve]

If it still cash flows to you minimum "cash" amount (not a % amount) then go for it.  The trouble you will run into is most lenders will want to see where you are getting your DP from, and can deny you the loan (1st) if you are leveraging your DP.  They look at it as you are not taking the same risk as they are since you have no "skin in the game".

This doesn't mean you can't do it.  It just means you need to be a little creative with the leveraged DP.