All Forum Posts by: Doug McLeod

@Ebony - you should advise your seller about hard/private money.  What he really needs is no financing contingency and a quick close - not necessarily a cash buyer.   There are MANY investors who can close in 10 days, sometimes less, with hard money financing and no financing contingency.

You can always put MORE down, but I'll assume you'd like to put down LESS! 

The easiest option is to borrow the downpayment from other sources (401k, friends/family, low interest credit card).  If appropriate, secure that against another property or the subject property (after close) with a second lien.  Get transactional RE attorney to write up any notes, deeds of trust, etc.

The next best alternative is probably to get a cash partner and go in 50/50 or some agreed split owning the property in an entity with a clear operating agreement that spells everything out.  Get attorney and CPA advice.

Welcome to BP.  Check out the podcasts and the blogs.  Find some yards to mow and start making and saving money.  By the time you are eligible to own property when you turn 18, maybe you can have enough capital saved up to buy a house that you can live in it at college and rent out the other rooms so that your housing is "free".

Assuming A and B are not two halves of the same duplex, I think you will look a long time (maybe forever) before you would find a lender who would consider equity in one property as a downpayment toward another.  Downpayment typically = cash or equity in the subject property.  

I am confident no conventional loan would work like this. I have never heard of any commercial or portfolio loans working this way either - unless you were financing as a package, in which case each property's equity above the price would contribute toward the "downpayment" for the package assuming the LTV is based on the ARV.

I had a SFR where a tenant claimed bed bugs after moving in. The house was new to me. I had just had it remodeled, but I have no idea whether there were or were not bed bugs before. The tenant had rented furniture from a local place. They gave her different furniture and I had the place treated just so we could move on. Thankfully no further issues.

You might consider letting the tenants out (with one month rent to cover them breaking the lease if possible - sounds like you acted in good faith) and then making sure the exterminator really gets in there - including treating surrounding units - to avoid the problem spreading.  And to avoid prolonged back and forth with the tenant.

I hear bed bugs can be really hard to get rid of.  Good luck.

Chris Dodd and Barney Frank - retired senators from CT and MA I think who sponsored a bill after the financial crash in 2008 which implements a number of regulations that impact lenders.  Basically - if you are doing seller financing you want to use a loan originator who is properly credentialed to put the loan together rather than doing it yourself.  Otherwise you open yourself up to potential regulatory violations if you do more than a couple of loans.

Do a BP search on Dodd-Frank or check Google or Wiki.

@David W.

By doing the HELOC for the downpayment, you are essentially doing 100% financing. This decreases the cash flow but increases your rate of return (potentially to infinity). Here you need to balance the need for cash flow (in dollars) vs. the % return you are getting. The cash flow needs to cover an allowance for maintenance, vacancy, and capital expenses. Greater leveraging can get you into deals and generate a decent IRR, but you are at higher risk of something going wrong where you end up cash flowing negative or can't deal with a major expenditure. If you are capturing equity in this deal - like 15-20% of the market value or more - then you might still be OK.

However, I suspect in the DFW area, you can probably find something with higher cashflow for the size of the deal and the downpayment.  I would suggest you show your numbers to @Hattie Dizmond and get her advice.  She knows the DFW market well or can probably refer you to someone. 

BP has a link to a list of hard money lenders, but you might need an upgraded membership to see it. Check the resources tab. 

If no access, talk to folks in your local REIA about reputable HMLs in your area.

@Leo Don - since you plan to live in the property, FHA can be a good option for a very low down payment, which will allow you to have more cash for another property sooner. If you are a veteran, you could potentially also try a VA loan. Otherwise, expect to put down 10-20%.

@Benjamin Voorhis - it works more or less like you describe.  However, in some cases, the hard money lender may require you to bring the balance of the rehab budget to closing and they put all the rehab money (theirs and yours) in escrow.  You start the repairs with your own money (if using a GC expect pay 1/3 to 1/2 up front) and then request draws from escrow as repairs are completed.  Typically there is an independent inspector who comes to verify the items completed (and there is about $100 fee for each inspection/draw).