What Is Cross Collateral And How Does It Work?
One of the most common questions I receive from people is "How do I get into a deal with no money down?" The days before 2008 of 'no money down' are gone in a way but there are ways to still make it happen. One of the best ways to avoid bringing cash to close in a transaction is using other properties or investments as collateral. To a hard money lender a free and clear investment property is the same thing as cash to close. So lets say you have a deal you are looking to flip and the construction numbers are 50k and the acquisition is 150k. Let's say the deal requires you to bring 40k cash to close to make it work. You then decide to offer up a flip you have on the market that is worth 200k as cross collateral. The lender looks at this and says, 'You paid 80k for that house and put 50k into it so as long as I have a first position, we can use that to offset cash to close'. This becomes a great way for investors to stay liquid and not tap into all of their funds while using their other properties as short term leverage.
Ian Walsh
215.839.3271
Comments