Using Private Lender For Down Payment Vs. Property Purchase

[Troy Deverill]

Hey everyone! I'm a brand new investor and I purchased my first property about a month ago,which is a suited house, and we are just finishing up the renovations and are in the process of getting it rented out. I'm looking for my next deal, but I don't have any capital of my own since it's tied up in my last property still, and I won't be able to get any out until I refi in 5 years, because I didn't use the BRRRR method for this one, so I managed to get my hands on a private lender who is willing to fund my entire project, with that being said, I'm trying to determine if it is better to use them to purchase the property and pay for rehab, etc. OR if I should just use them for the down payment & rehab instead, because obviously interest @ 10-15% on 50k - 80k, is a lot lower than 10-15% on 250 - 350k. Thanks everyone!

[Jaysen Medhurst]

Using the private money as a DP and then getting bank financing for the rest of the purchase probably isn't an option, @Troy Deverill. The bank will want to know where the DP is coming from. The fact that you're borrowing it means you're 100% leveraged, more than that actually, since you're also borrowing for the reno. The bank will never go for that. 

A better approach is to either fully fund using the private money or partner up with the private-money person. They bring the capital you bring the sweat.