No Money to Invest? Hard Money Isn’t the Only Answer!
| | Thursday, March 18, 2004 @ 08:00 AM EST
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Contributed by: Susan Lassiter-Lyons
Susan Lassiter-Lyons Properties
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We’re all looking for a way to acquire investment real estate with no money out of pocket, right? It’s called leverage. Let’s talk about a few strategies to get you going without having to take the lock off your wallet.
First off, good credit is not necessary to invest in real estate. There are hard money lenders out there who will lend on the collateral instead of your credit score. So don’t let this be a barrier to you entering the REI arena. With that said, if you want to maximize your profit potential
and get stellar rates on your loans that equate to smaller monthly mortgage payments, it is essential that you make an effort to know your credit score and work toward improving it.
Most full doc “A” paper mortgage loans out there will go as low as a credit score of 620. If you need a higher loan to value (LTV) of say 90-95% and you want to limit your down payment OR if you want to go with a stated doc loan (meaning your income and assets are stated but not verified), you’ll need a score of at least 680. 700’s is a great place to be when investing in real estate.
That’s a strategy if you want to pay a down payment and work with a regular lender. I personally don’t like spending ANY money to acquire a property OR working with a regular lender. Here’s a strategy you can follow to do what I did.
First, find what’s known as a portfolio lender OR a broker that has a portfolio lender or funds loans out of his or her own warehouse line. I found a small credit union through my broker that funds loans up to 100% of the sales price on non-owner occupied properties as long as the LTV is no more than 80%. Some of you may not know how cool this is, so I’ll explain. Most lenders, for purchases, calculate loan to value ratio (LTV) on the loan amount divided by the LESSER of the sales price OR appraised value. So, this is no great deal for investors who are negotiating a killer deal on a property. You still could have a high loan to value (LTV) because the sales price is low even if the appraised value is high. Get it?
My portfolio lender uses the appraised value instead of the lesser of appraised value vs sales price as long as I can refinance within 45 days. So, the next part of the equation is to find a loan program that has no appraised value seasoning on refinances. Viola, you have just created your own zero down investor loan. Get out there and take a look to see who you can develop a relationship with in your market to make this happen for you. Or better yet, get a good broker on it and buy, buy, buy!
Note:
Susan Lassiter-Lyons, owner of Lassiter Mortgage Group, LLC, specializes in residential and commercial financing for real estate investors. Visit http://www.lassitermortgage.com for more.
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answer! only lender. work hard make real strategy money don’t find acquire invest? stated mortgage instead lender have with regular estate. want score will take there long sales (ltv) buy, appraised good loans need this deal payment portfolio funds loan know credit broker great value lesser down isn’t price
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Average Score: 3.90
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