100% financing methods??

Question

Ok first, is it rare for a seller to finance 100% of the deal? (I think yes but wanted to see what your input was and if you guys have heard of seller doing so) My second question is say an owner will finance 70% of the deal but you don't have the 30% to put down. What could be good options for getting the 30% besides of course saving up the money? I was thinking hard money? Paying the higher interst rate on the 30% then refi and cash out the seller and the hard money loan.

Would that be possible? Is there any other options or strategies you could use to get a deal like this done?

Oh I just thought of something, could a buyer ask for 100% financing and for the 100%pay 10-15% more then the asking price to get the deal done?

I'm just begining and trying to learn as much as I can. I'd like to do owner financing deals as my niche. It seems to have great upside.

Just bouncing ideas around here. What if someone with a soild deal gets a hard money loan or a loan in general for the remaining balance of a owner financing deal and moves the loan to the 1st position and the owner finance to the 2nd? Could is happen? If so would you be able to refi and cash out the seller and the loan amount with a new loan a couple years down the road?

I know it's alot to ask, just brain storming

Will Barnard · Answer

Is your plan to buy and hold? This is the most important question as the answer could vary greatly depending on your strategy. For buy and hold, I would never advise anyone to finance 100%. You are over-leveraged at that point and particularly as a beginner, will likely run into some problems in the future using such high leverage.

It is possible for a motivated seller to finance 100% of the purchase, however, you had better be getting that property at 50%-65% of the actual value or you will be over-leveraged. Taking out a second loan for a balance 20%-30% would be difficult as most lenders will not want to be in second position when the total of the two notes is 100% of value, that would be foolish on a lenders part.

Will Barnard · Answer

@Mark and others mentioning refi later -Unfortunately, there is no way possible to guarantee that you will be able to refi later, be it a cash out or a rate and term refi. The reasons are vast, some of which include - bank lending practices may change once agin and it not be available, your financial picture may change for the worse, your property value may decrease, the property condition or area may be adversely affected, etc.

So, when your plan is to refi in 1, 2, or 3 years later, you had better have some alternative exit strategies for the "just in case" scenarios. I think such strategies are dangerous and the risk is too great for my tastes. I would rather negotiate a long term financing plan with a seller or lender BEFORE buying, not hope for one in 2 years.

James Hamling · Answer

Not to be a jerk, but really, seriously, please say you were not serious in asking this. 
   Leveraged to 100%, or even anywhere near it, unless you have the cash to burn without a care, is a recipe for disaster. You start loosing exit strategy potentials, big time. And then the chance of going upside down fast.
 
   Where have you been for the last 3,4 years?

Our current R.E. market in the U.S. as a broad brush generality (I know there's many exceptions to this) is a declining market, meaning falling values still. That's why.

Jon Holdman · Answer

That would be a "rate and term" refi, not cash out.  You're paying off existing loans, not taking cash.  This will be much easier than a cash out refi.   We're trying to refi a mini-storage property and wanted to add about $40K onto the $1.425 million payoff on the existing loans.  No dice.

Kevin Yeats · Answer

Why not bird-dog this deal and make some cash?  Then bird-dog another and make some more cash ... Eventually, you will have enough cash to buy a deal and put 20% or even 25% down.

Jeff S. · Answer

If you have a property you can improve and even use leveraged money you will have equity at which time you refi and pay-off your loans. Wasn't your question about how to get 100% financing? The only reason you do this is because the property has the potential for equity after something happens whether that be improving through rehab or just because you have a super deal. Hopefully you did a little something to increase value.

On the other hand someone holding a small position with a first might be willing to give you a fair rate since risk is minimal.

The idea is to get the seller on board since they have a property in need of repair and you are going to fix it and get them their cash. Buying right is essential. Just work the numbers. Remember with the seller on board they can be temporarily flexible to make numbers work. All they want is for you to be successful so you can resell or refi and get them their money.

Mark Fitzpatrick · Answer

If you're doing buy and hold, purchasing for a good discount will make it much easier to get the financing you need. If you buy for a good discount with hard money, for instance, you'll find it much easier to refi into a permanent bank loan later without having to bring money to the table at closing.

Nate Santillanes · Answer

@ Will Barnard specifically on his comments, why should one avoid leverage? What problems might you run into using too much leverage?

Justin Paul · Answer

@ Jon-Thanks for clearing the refi up. So your saying it would be easier to get a "rate and term refi" to pay everything off. So if this happen I basically would have no equity in the property but would have only one loan and it would be a long term right loan correct?

@ Jeff-What your talking about is what I was thinking about. Find a free and clear property with a owner willing to carry, or the same senerio but with a small amount of debt left in it. Then try and get the rest of financing through a hard money lender or private investor correct? That would leave me over leavage tho right?? Because of the 100% financing plus the interst to both the seller and private money right?

Jeff S. · Answer

The way to do this is to find a free and clear property or with a very small loan balance and get a private 1st for 20 or 30%, high interst if needed and have the seller carry the balance. If there are many repairs you can have the cash lender loan for repairs too showing up with loan balances exceeding the sales price.

100% financing methods??

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