Is it possible to buy with no money out of pocket?

Question

I have some buy and hold rentals and have never done a BRRRR. I have great credit but limited capital. I also have lots of connections all over the nation to help. Is there a strategy to do a BRRRR with little to no money out of my own pocket?

Samuel Coronado · Answer

A lot depends on your entry price and instant equity.

I borrowed $30k on a personal loan from Discover for 15% with no fees for a plot of land and paid "cash" for it. I then went to the bank and mortgaged it for the same $30k at 8.5% over 20 years. I paid about $1500 in closing costs between title, appraisal, etc, but the original loan was wiped out in favor of a new lower rate.

I am essentially in the property for nothing besides closing costs as the land appraised at $45k. To the bank it's a good deal because there's 40% equity in the property. To me it's a good deal because I only paid $1500 for a 45k property.

The payment is roughly $260 a month. The lot rent from the mobile home that will be on there will be roughly $400. Insurance is $300 a year. Taxes are the $100, so about $290 a month expenses. $110 a month in cashflow. On paper, that's a 88% return before depreciation (can't depreciate land, but you can do a cost seg on the septic and other improvements), appreciation, etc.

How many times can you spend $1500 to get an 88% return?

Others do this at a much higher level. I'm just a simple yokel from the backwoods of Alabama reading about how you guys are doing things and trying to learn by doing. :)

Andrew Bosco · Answer

Hard money lender/DSCR - both are good options. Maybe 10% down with seller paying closing costs?

River Sava · Answer

You could refi via DSCR and use that for your next DP

https://www.biggerpockets.com/blog/brrrr-loans-what-are-the-...

Sean Graham · Answer

Creative finance all comes down to the creator! I'd say yes.

Jake Baker · Answer

@Aristotle Kumpis

We do 10+ Flips/BRRRRs annually and fund with Hard Money and Private Money.

Hard Money will fund 90% of the purchase price and 100% of the rehab on a draw schedule.

Our Private investors will fund the remaining 10% of the purchase price, the first portion of the rehab (to be drawn later from the HML), and the holding costs.

Of course, with private lenders, you must give up equity or a return on the debt.

V.G Jason · Answer

You're a real estate "coach" and asking these questions?

Stuart Udis · Answer

@Aristotle Kumpis Lots of similar posts to yours where investors are seeking advice on how to buy real estate with little or no money. Most who respond recommend creative financing....seller financing, sub to etc. or using highly levered hard money debt. I recommend focusing your attention on sourcing great real estate rather than allowing the creative financing be the tail that wags the dog.

There is a time and place for highly levered hard money debt but its expensive. Sometimes when examining the entire capital stack, its determined the higher finance charges paired with higher leverage is a winning proposition but only experienced real estate investors should be making that call.

Meanwhile, the sellers who are most likely to offer creative financing are normally the owners of  real estate that have issues.....condition.....low barrier/over supply market......or perhaps pricing issue, and one of these factors is why its not marketable in a arms length transaction and why creative financing would be accepted. Not always the case but more times than not, this is the reason.

Focusing on the best quality real estate will allow you secure more favorable financing terms, more likely to achieve favorable exits/refinances, more likely to attract the best capital partners. This is how I grew my real estate business over the past few years. Once I realized it was the quality of the real estate that opened the doors, my business took off. I achieve higher LTC financing because of the strength of the real estate without having to go to hard money lenders. I will still use alt. lenders from time to time depending on the circumstances but I will also achieve similar LTC financing through traditional banks and when I go to my capital partners with a term sheet for 85% LTC through a traditional bank with a fully capitalized interest reserve, healthy contingency funds and soft costs built in and the real estate great, its far easier to raise capital because far less equity is required to fund the deal but this all starts with the quality of the real estate.

Trevor Finn · Answer

@Aristotle Kumpis,To answer your question, Yes! The key is by leveraging OPM (Other People’s Money).Do you have private money lenders in your circle who might fund the deal in exchange for equity or some interest?

Allie McAlister · Answer

@Aristotle Kumpis

I would definitely advise you to look into hard money lending options if you're looking to buy with little to no money down. You'll have higher rates going that route, but it may be a good fit for you.

What market are you looking to purchase in?

Crystal Stroessner · Answer

Yes. As a Hard Money Lender I lend 90% of the PP and 100% of the Rehab

Is it possible to buy with no money out of pocket?

Most Popular Reply