Do Not Be This Guy... When $0 down hurts

[Chris Seveney]

Backstory:

I received a call from an investor this week. They were looking for a portfolio loan. 

They had four properties they owned. 

They acquired them in 2022 all with zero down and all were recently renovated homes. Total amount owed was $1.4M. 

They had acquired them $0 down and with seller financing all from the same seller. The interest rate was 8%. 

The investor, who also has 5 other properties which have equity in them was unable to get a loan. LTV is still too high on those others.

He is also trying to sell all of these homes. The problem. He has each one listed for $100k UNDER what he owes on them. They have been on the market for over 150 days each and he cannot sell them. 

Reality

This investor is basically going to lose it all. He stopped paying on the properties. The lender who is very savvy and a company is foreclosing. The lender is going to foreclose, then take the deficiency judgment on the balance left from the sale of each of these properties and post judgment against the other properties. They will be able to force the sale or just foreclose on those as well. 

This is an example of being cash poor and what can happen when you do not have equity in properties, or worse - have negative equity because you overpaid on seller financing. 

I told them there was nothing I could do and good luck. 

[Marcus Auerbach]

caller: "Hey, I am new to real estate and want to invest in Milwaukee for cash flow. I want to use the equity in my CA home for the downpayment"

me: "gasp"