My bank still requires me to put in 3% of my own, but it depends (LTV, appraised price, etc.). You can also work the price to have the seller pay some concessions, so you don’t have to come up with it out of pocket at close.
Find a good lender, establish a relationship, and be very upfront with them on what you are doing. If you have to withhold facts from your lender, then you don’t have the right lender. The right lender will loan you 87-90% all day long, with seller carrying 10%. (on 1-2 unit properties)
Even better than the 90/10 is to have the seller carry 20%, so you can avoid the PMI on the bank 1st mortgage.
I would like to get into buying properties and flipping them for a profit, I know I can find good deals to do this with, my questions revolve more around the financing. I own a condo free and clear that I currently rent out, I would say it is worth in the 100K to 110K range. I also have about 50K in equity in my home as well, although my wife would probably just assume that was left alone. What would be my best approach as far as finacing the properties I would like to flip. Would taking out a credit line on my condo for 80K or so be a bad idea? If I did do this and put 20% down on a property would a bank be willing to finance the additional 80% and could I have multiple transactions going on simultaneously or would the bank not like this. I know this approach isn’t very creative but I figure I may be able to use this equity I have to my advantage and not need to be as selective in finding sellers that are flexible in terms as much as ones that are flexible in price. Any thoughts are appreciated.
An equity line on the condo would be a tough sell because banks don’t like to make seconds or credit lines on properties that aren’t your primary residence. Your better option on that property is a cash-out refinance, but that costs a fair amount in refi costs, and makes that money a little more expensive, even with the decent rates these days (you should be able to get a refi up to 80% for low 7% range.)
BUT, a line of credit on your house is about as easy money as it gets. You can get a line at most of the major banks for up to 95% of the value (after the first mortgage) and be paying interest only on a variable rate of low 6% range.
You can get into 1 or 2 family units for 90% LTV, and the bank is happy to loan that if your credit & income are decent. Your better bet is to find the deals where the seller will carry at least 10%, preferably 20%, and you can leverage more deals with your resources.
Dive in; get educated on your financing options. Find a good lender to educate you. I think that is the key to a real estate investors success: Other People’s Money, and the banks have money to lend, especially to their best customers (and repeat customers!).
I’ve leveraged about $80,000 from my home equity into properties worth about $750,000. That has been over the last 4 years, and I look back and can’t believe I wasted that money putting 10%-20% down on those properties! I won’t do that again. . . . There are too many deals out there where the seller will carry at least 10%, and the bank will carry the rest.
If I find the people that are willing to hold 10% and take a loan for the remaining 90% will the bank go for that since I would not be putting anything up myself. Or would I not be telling them this.