You Guys Should Read This So You Understand 100% Financing

I really appreciate the information! Makes a lot of sense and really has me thinking about what I could offer in a situation like this!

I have bee doing a lot of research on lenders and HML and PML. Now private lenders have more leniency and can write out loans above the purchase price to include rehab work as well, but hard money lenders require more strict lending guidelines. Once you build up a reputation with them and have done a few loans then things are a little easier.

I have found a few owner financing properties - but again you have to have a lender willing to take a seller second, and the balance still has to fall in between certain percentages of the value of the property.

So if your purchase price is within 65% of the value - a lender will typically lend 70% of the purchase price, some only go up to 50%. Then if they allow you can get the seller to carry the remaining 30%.

The seller I found will carry 70% or 80% and I put up the difference. Now this is where funding partners or JV's come in, however it should be done in a trust. It looks better to lenders as well if the property you have a JV with is in a trust, then their money they bring in isn't considered a loan.

We must be really fortunate here in Colorado. I work will several HMLs that will fund 100% of the deal. They will fund 70% of ARV. So if your purchase price and rehab cost comes in under 70% of ARV they will fund 100% of purchase and rehab costs. There are out of pocket expenses. They charge 4 points (payable at closing, so not out of pocket) and 15% interest only(out of pocket) collected in monthly payments until the property sells OR there is a 9 month balloon. You must have 6 months of interest payments in liquid assets or they won't loan to you. Not cheap but better than not doing a deal! Not for most new investors!

Michael Mangham
MD Home Acquisitions LLC

I'm following you on the info you provided. I currently have a company I owned that is an LLC for a music business venture I started back in 2007. So if I wanted to put a property under a trust, could I just use my company to purchase it!?

And thanks for the help and responses!

Some of the lenders I was talking to said you could work around these guideline such as you said - 6 months worth of liquid assets, etc. Even leveraging with other properties can be done, but the most important thing is the area and property value, and the less amount of risk that is involved.

I found one lender that would do the loan for you for a percentage of the value, say 70% even if your purchase price was lower but they take 6 months worth of interest payments out at closing ( actually allows to rehab without paying monthly payments ) but you have to have experience in the field you are working, or a partner with experience working with you and decent credit.

I have found several that say they will lend up to 70% arv, but want loan commitment fees upfront, usually 1% of the loan amount.

Most of what I am talking about is geared for commercial, and SFR have slightly different guidelines too because their value goes more by what the houses look like, compared to the others where commercial goes by what the property cash flows like. The better the cash flow the better the deal.

A lot of it is making a name for yourself as well.

Of coarse there are private hml that lend with more relaxed guidelines too. It's all about how the underwriter see's the deal.

As long as it's licensed in the state you are buying property in I think you can, but I'm not sure if it has to be made for the industry or not.

When I started my corporation they asked what industry it was for. My company is not licensed to buy property in all states, just where I live. I will change it once I get enough properties under it.

Honestly I'm not sure about it & I guess that is my research for the weekend! Seems like Arkansas law lets you get away with majority of things that other states don't!