Looking For a Post About Using Paid Off Property as Down Payment

[Paul C.]

I read a post recently where an investor mentioned they were able to get 100% financing on a multifamily apartment complex by pledging paid off property for the loan.  I didn't give it much thought at the time, but am now more interested in the idea and just can't find the post anymore.

Does anyone know what I'm talking about?  Thanks!

[Andrew Michael]

This strategy is often used for shorter term loans like flips or value add plays.  People who do not have money to bring to the table but own a property free and clear or have a considerable amount of equity in a property can use the equity to borrower against another.  I typically see it in the form of cross-collateralzation or curtailment as @Tom S. said.  Most lenders will require that the property is owned in some type of entity and non owner occupied.  

If you have multiple rentals you may consider the strategy of using all of the profits from your portfolio to quickly pay down one specific rental unit.  Then, you have an asset to leverage and can position yourself for no or low money down loans.  

Keep in mind the more money you borrower the bigger your loan which will cut into your profit margins.  It all depends what your strategy is and what makes most sense on a per deal basis.  Most people are willing to give up some profits if it means no money out of pocket.  

PS my first commercial multi unit was a no money down deal (I actually got paid at closing) so its very possible.