All Forum Posts by: Grant Greene

All in: 10% of the cost of the property and renovation – that’s the down payment and closing costs combined!

Example: you purchase a property for $100K, and the reno costs are $50K. To get access to the funds needed for this, you’ll need about $15K TOTAL.

If you decide to hold onto the property as an investment, you have ANOTHER great option.

Let’s say the property is now worth $350K, and you put a renter in place. We can refinance your original loan and take out up to 80% of the equity – with none of the new mortgage hitting your credit report. After paying off the original loan, you have access to over $150K to go out and acquire more income-earning properties. Lather, rinse, repeat.

You went from spending $15K out of your pocket to owning an income-earning property AND having access to another $150K for more projects without having to worry about adding them to your credit report.

@Pope Lake, thanks for clarifying that!  I'd still rather have to come up with $7K versus $22K. :) 

@Alex Olson makes a very good point about finding a co-signer. The sticking point with an FHA loan is that they want a two-year work history for every borrower. If you and your friend, along with your co-singer, have good credit, you'll want to go with a conventional loan - you can still get in with a small down payment (the usual reason people gravitate toward an FHA loan). I have an alternative idea for you and your friend - it doesn't require income verification or job history.

I'll disclose up front that is for non-owner occupied properties only; I realize this throws a bit of a wrench into the house-hacking idea, but hear me out. There's a loan product that allows you to finance BOTH the acquisition cost and the renovation costs, and qualification is based on liquidity and DSCR rather than income and job history. Usually, you have to come up with 30% down to acquire the property, and then you have to foot the bill entirely for the renovation costs. This loan product will allow you to finance the acquisition for as little as 10% and possibly finance 100% of the renovation costs - those numbers are based on experience.

I realize that house-hacking is ideal because it gives you a place to live (and get your mortgage paid by the other renters), so if you can get a co-signer and go conventional, that's perfect. Just as an aside, on an FHA loan, schooling counts as job history IF it's job specific: you're going to nursing school, and you're graduating in two months and have a job offer. We could use your time in school as work history. Conversely, if you're going to school and majoring in business, even if you got a job in a field that fit your studies exactly, they wouldn't count your school time.

Mull it over and let me know if I can provide you with more information regarding purchasing an income property. 

Great job, Pope! You indicated that you had to put down 20% of the all-in deal price.  Did that mean you had to come up with 20% of $105,000 ($70K for acquisition + $35K for reno)?  If so, that means you had to come up with $21K.  Or, did you have to come up with 20% of the acquisition price of $70K, which is $14K; did you have to foot the bill for the $35K reno costs yourself?  So, you either had to come up with $21K or $49K.

Either way, there's a new loan product out there that will enable you to do an identical project for as little as 10% down on the acquisition and 100% finance the reno costs.  All in, you're only having to come to the table with a $7K down payment.  It's new, and it's a complete game changer for us here on BP!

@David L.

@David L.you ask an interesting question, and the obvious answer is helping people understand the way to structure their acquisitions and make it happen over and over again. 

@Mark Sewell I don’t believe I’m related to David Greene. 

You're exactly right, Mike Ealy, and that's the reason I bring it back to the forefront here. Too many read about the BRRRR concept, but they don't make the financing connection.

Admittedly, the title is a bit of a teaser, but it's 100% true - and it's simple!

Let's say you have the means to purchase a property in cash - keep it simple, $100K.  You need to put $10K into it to bring it up to "lendable" condition.  Once you've done so, you get it appraised, and it comes back with a value of $160K.

You can immediately pull out 100% of the amount at which you purchased the property - yes, you get ALL $100K back.

Let me give you a real-life example:

An investor we work with in Arizona bought a distressed property (the kitchen had been completely torn out) for $111K.  He put $10K into it for a new kitchen, and the rehabilitated property appraised at $144K.  The loan product mentioned above allowed the investor to do one of two things: pull out 100% of the purchase price or 75% of the new appraised value, whichever is less.  In this case, 75% of the appraised value is $108K, $3K less than the original purchase price.

So, he pulled out $108K and had a mortgage (PITI) of just under $700/month. He rented the property at $950/month, so he made a little over $250/month. In one year, that's $3K.

Let me get just a little more nerdy here:

He put $121K into the project, and he pulled out $108K - all in, he invested $13K. In his first year as a landlord, he netted $3K - that's an ROI of 23% - and he owns a property that increases in value each year. With the $108K that he pulled out initially, he is in a position to find another distressed property and do it again (and again, and again). Questions?

Let’s say you can acquire a triplex for $150K, and it needs $75K in renovation.  Traditionally, you would need to put down $45K (30%) for the property and foot the entire bill of $75K for the reno - all told you’re in for $120K to get started. 
With our product, it’s possible to acquire the property for $30K (20% down) and get the reno costs financed for $11,250 (15% down). In this case, you only need $41,250 to get started rather than $120K. Additionally, the qualification is NOT based on income. The purpose of this product is to enable you to make your money go further and possibly do more than one project at a time (if you wish). 

Carlos, with the cash you have on hand, it may be very possible for you to acquire the property and finance both the acquisition AND the renovation costs. In most cases, private lenders will finance the acquisition but leave it up to you to finance the reno. We have a loan option that will give you the ability to finance both, and do it with less money. Let me know if you'd like more information on that. 

Thanks, @Anthoney Hanks! If you’re looking to purchase a home for yourself, Anthoney’s guidance is perfect. If you’re looking to do RE investing, his advice is still great, and I’ll add this: if you have someone who will partner with you, I can show you how to acquire a property for a lower down payment and get most if not all of your renovation costs financed. Let me know how I can help!