Possible to get Hard Money with no money down??

[Mike Nelson]

Ok so i'm ready to get my first rehab underway, I've done enough research and it's about time that I pull the trigger. The only thing that holds me back is "MONEY". I don't want to use my own and the only way to go about this is to use HM.

HM lenders usually loan %65 ARV. So, lets say if I purchase a property thats well below ARV - Repairs - (holding cost) "I know this would have to be a steal" will I be able to secure HM w/o any of my own money?

[Jon Holdman]

Sorry Curt, but I disagree. Once the home changes hands for $32K, its unlikely you'll turn around and sell it for $50K. You've now established a value that's going to be tough to argue with. Homes that are truly worth $60K rarely trade hands for $32K. I suppose that happens once in a while, but rarely. More likely is the home is worth $60K once fixed up and without that investment, the value is significantly less.

Points never did get fully addressed. Points come off the top.

Lets work a deal and see what you need to do a deal with no cash of your own. This is just about impossible.

ARV is $100K. HML will lend 65% at four points and 15%. HML was't monthly payments. You need to hold for six months to close a sale.

Loan is $65K.
Less four points ($2,600)
Loan proceeds $62,400
Various loan fees: $1,000
Property closing costs: $1,000
Up front costs (inspection, insurance, utility fees): $500
Six months interest: $4,875
Other holding costs (utilities, mostly): $600
Left to spend on purchase and rehab: $54,424

In other words, 55% of ARV.

That's a SCREAMING deal. That's VERY tough to find.

The bigger downside is that if anything goes wrong, e.g., you go over budget on the rehab or it takes longer to sell, then you're totally out of money and you lose the house. Actually, that doesn't matter to you because you have nothing invested. But the HML doesn't want this and won't let you get into this position.

So, even if you can buy and fix at 65% (or, whatever the HML will loan you), you need another 10% (minimally) or 15% (to avoid surprises) of your own cash to complete the deal.

A savvy HML will want your cash in up front. You may have to bring some of it to closing. You'll probably have to pay for labor and materials and then get reimbursed by the HML.