Are There Really Any No Money Down Hard Money Lenders?
Yes, we are a no money down hard money lender when a deal meets our criteria for that type of loan. In our direct lending model, we don’t ask for down payments. In order to access these loans you will need to enroll in our Find-Fund-Flip System. We are able to fund up to 70% of the After Repair Value (ARV) of a property. That 70% can cover the property purchase, rehab, and loan costs – where most hard money lenders won’t even consider financing anything except the property costs.
Let’s look at an example:
Let’s say you find a deal with an ARV of $200,00, meaning we can fund up to $140,000 (.70 x 200,000).
You put the property under contract for $110,000, you rehab it for $20,000, and there are $10,000 in other costs – totaling $140,000.
In that scenario, you would literally be required to bring $0 to the table, and you could complete a deal with massive profit potential.
Yes, fitting everything under 70% of the ARV can be difficult. It’s hard to find deals that fit that criteria – but our members do this all the time because they follow our system.
In fact, our entire program is designed to teach our members how to find deals that require no money down.
What If The Deal Doesn’t Quite Qualify for 100% Financing?
Let’s say that after you crunch all the numbers on your deal, you’re still $10,000 short – money you need to bring to the table. However, you know that there is still massive potential on the deal.
Most people I work with usually will misinterpret this gap as us asking for a down payment, but that’s not really the case. It’s my goal that no investor gets turned away because they’re $10,000 short of a big payday.
With us at DHM, you’d submit a loan application and we’d order evaluations of this property. We would have 2 independent evaluators go out to the property and submit reports back to our underwriter with 18 comparables and their opinion of the market. It is very common for investors, particularly new investors, to not have tight numbers on an application for the rehab costs. You’ll get better at estimating this as you gain more experience.
It is also extremely common for new investors to not understand how to determine appropriate comps. You’ll need to remember that we’ll always use the lowest comps – not the highest or the average.
You should also remember that a comp is not just a similar house nearby. A true comp is a recently sold or on-the-market nearby property with similar specs.
The rehab costs are based on what it will take to get your potential flip to compete with those properties. This is why our property evaluators are always real estate professionals who live and work in that area. They know that there may be houses that technically are within a mile of the property, but not actually a comp, because sometimes neighborhoods that are in the same area can vary vastly in values.
Our underwriter talks to these evaluators and determines what we feel is the correct ARV of a property like this in that neighborhood.
Getting a real clear picture of what the rehab will cost, walking the house with your contractor, and really looking at the comps will help you get nearer the numbers that our evaluators and compliance team will return.
We also understand that this situation arises and have created avenues for our borrowers to be able to cover this gap without having to use their own money.