Creative Financing Noob Questions

[Chris Bluem]

Thanks for taking the time to read and respond. I am starting to look at a few rental properties (SFH & Multifamily) and beginning to run the numbers. So I just wanted to make sure I understand some of the strategies to finance the deals and also if I am missing any, and also have the opportunity just to see what everyone has to say as I am trying to learn as much as possible. My goal, given limited funds would be to finance with zero equity down. I have a good paying job and good credit.

BRRR Strategy - so the idea behind this (using simple numbers), is that for a property with an ARV of $100K, I would need to get it for ~70% minus repair cost (assume $10K) so lets say $60k. I purchase with cash/hard money/credit lines, put the $10K into the property, rent it for ~6mo, and then refi for 80% of the ARV or $80k. This would yield me the property and $10K cash to repeat

In simple terms is that right? and on the multi family side when refinancing, does the bank look at cap rates or do they loan more like SFHs? Also, i know this ranges, but on average what are the types of properties that are best to target? Ones that need a lot of work, or ones that need slight upgrades? I assume the more work the more discount when buying but also more risk, so just wondering what might work good for someone starting?

Other scenarios - What about properties that are in decent shape or even turnkey and cashflowing with a good cap rate or being sold below comps? What are some ways to finance these deals with no cash (or being able to get the cash back out)?

I could get a residential mtg and have the current owner take 20% as a second note. Could I pay 20% higher price than listed, and get a credit that is used as my equity, and essentially finance 100%? I could purchase the property, lets say 25% under market with hard money, wait 6mo and then just refinance at 80%?

Random Questions - So when you purchase a house lets say with hard money, and it is rented and cashflowing, you have to wait (typically) 6mo until you can refi that property? For hard money loans, most I have seen advertised cover 80% of the purchase price, but is it common to get (one you have established a relationship) 100% financed assuming you get the property 20% under market? To get these types of deals what is the most common method to find them (say when getting started), is it through wholesalers, MLS, Zillow tracking down current MF landlords, investors looking to exit their properties?

Any other insights, strategies, opinions, or words of advice would be greatly appreciated. Thank you!

[Tom S.]

@Chris Bluem Also a short answer, yes, you're understanding the math correctly. Also as Mark mentioned, a true 0% down would most like be through owner financing, and even then, really tough to do unless the place is so bad, the seller wants to get rid of it. Most owner financing purchases I've down are still 5 - 20% down. HML's typically will want something down too, even if you're getting it below market. They want the "skin in the game".

Another note, the numbers you used in your scenario are almost the exact same numbers for the past purchase + rehab I did.  I was successful in purchasing and fixing up the property, and was able to get the cash back out to potential use for another property.

Good luck!

- Tom