Home Buying in Chicago>Question Details

Jessica John…, Home Buyer in Chicago, IL

How to obtain 100% Investor Financing?

Asked by Jessica Johnson, Chicago, IL Sun Nov 18, 2012

HI ALL I am currently reading a book on real estate investing and just have a quick question on understanding some concepts. The Author stated that you could obtain 100% financing if it appraised well above what you have bought and rehabbed for the house. So basically I am suppose to purchase the house with cash, pay for the rehab work, get it appraised and then try to obtain financing from the bank? So they are initially paying back my money invested if it appraised above everything I put into it? How does this work???

Help the community by answering this question:

Answers

17
Michael Cheng’s answer
Yes, that could work in theory. Let's say you find an entry-level house for only $500K and added $100K in rehab. Then, you get it appraised for $900K. If you can get a bank to extend you $600K in financing, then you've just gotten 100% of your money back. Of course, it's in finding that deal which is a needle-in-a-haystack effort, especially in this market environment.

Likewise, if I could somehow get pre-IPO shares of a company at $1 and sell it at an IPO price of $20, then I would borrow everything I can to buy those shares too. Doesn't happen often though.
Web Reference: http://www.archershomes.com
3 votes Thank Flag Link Sun Nov 18, 2012
Back in 2010-2011, you could reasonably do deals like this all day long. Nobody was buying and you would find good deals just lying around for months. That window of opportunity shut down between early Feb to mid March of this year. Investor appetite turned on a dime and every decent deal got picked up in a hurry. As we reach the end of the year, speculative interest has investors driving up deals above fair market (based on sales from 2-3 months ago).

Now, if you're seeing some really sweet deals that professional investors aren't touching, then you should approach with extreme caution. Just reading a book or even being a licensed real estate broker doesn't adequately prepare you. You need experience, and lots of it. If you don't even have the cash to do the deals, then I'd recommend you continue to focus on your studies and go find a mentor to work for a few years.
Web Reference: http://www.archershomes.com
2 votes Thank Flag Link Sun Nov 18, 2012
Hi Jessica,

If you are going to live in the home you can obtain a FHA 203K loan. If this is the case I would speak with Tracy Compagna Vice President of Mortgage Lending guaranteed Rate 773-383-1405. However, if you are simply purchasing as an investment property it sounds like you will need a hard money lender.

Jessica, if the book you are reading was published between 2006-2009 you may want to check for a revised addition.

Warmest Regards,
1 vote Thank Flag Link Mon Nov 19, 2012
Keep in mind that when the property has been purchased for less than 1 yr, the lender will offer financing based on the LESSER of purchase price or appraised value.
1 vote Thank Flag Link Mon Nov 19, 2012
Got it. Thanks everyone for your advice.
1 vote Thank Flag Link Sun Nov 18, 2012
It was a terrific question!
Flag Mon Nov 19, 2012
Simply put, these dont work and they are not possible.
1 vote Thank Flag Link Sun Nov 18, 2012
Thank you Jeff I'll be sure to reach out to him tomorrow. Carl the book is Buy & Rent Foreclosures by Joseph Neilson copyrighted 2011. I notice tonsss of condo's ranging from 25k-40k REOS in prominent area's that could easily appraise for that amount after rehab and updating is done.
1 vote Thank Flag Link Sun Nov 18, 2012
Of course, if you can buy something for less than its real value, but where is that seller who is willing to sell for so much less than value? Your "Phillip if I purchase a property for $30,000 put $20,000 in rehab work, appraisal comes back at 100k, bank loans up 70%, making it at $70000 is that not doable?" What assurance do you have that the bank will appraise at $100K something you put 50,000 into? Dooing the wpork yourself, like putting on a new roof, yourself? Installing a furnace, yourself? Updating electric, yourself? If all a house needs is painting and scrubbing, it is not an example of 30K to 100K with just your sweat equity. The 20K you put into it makes it a 50K house. maybe 60K, maybe 70K, but not 100K. Then an equity loan today is not like it was 10 years ago. What book did you read? Tell us more.
1 vote Thank Flag Link Sun Nov 18, 2012
Phillip if I purchase a property for $30,000 put $20,000 in rehab work, appraisal comes back at 100k, bank loans up 70%, making it at $70000 is that not doable?
1 vote Thank Flag Link Sun Nov 18, 2012
It works in fantasy land and in books only! When was that book written? Those days are over.
1 vote Thank Flag Link Sun Nov 18, 2012
Wieslaw (Wesley) Jura Vice President. NMLS ID 225274. Direct: 773-304-3412. Fax: 773-283-2788. Cell: 312-405-2404. wjura@unitedequity.us.
0 votes Thank Flag Link Sun Nov 18, 2012
Hello Jessica. 100% Financing is no more. Lenders require some form of down payment now a days...
0 votes Thank Flag Link Sun Nov 18, 2012
Yes, cash for condo is risky, very risky. Yet financing is 20-30% down and FHA nigh impossible, with foreclosures. 2011 book based on past years in RE, but not 2012 market reality, my guess.
0 votes Thank Flag Link Sun Nov 18, 2012
Much harder to do with condos. Chances are the condo price is low due to the condition of its HOA.
0 votes Thank Flag Link Sun Nov 18, 2012
Contact Bernard Duganzik at Baird and Warner Financial Services. I know for a fact he has helped several investors do cash out refinanced- not at a 100% but 60%-75%.
847-491-1855
0 votes Thank Flag Link Sun Nov 18, 2012
Hi Sohail an FHA 203k wouldn't be needed due to me paying cash and doing the rehab work myself, and hoping to get financing to get my return back??
0 votes Thank Flag Link Sun Nov 18, 2012
Jessica,

This could work and completely financed in theory of overall appraised value with a rehab or 203K FHA loan. There is currently no other way to procure financing of 100% unless to work with some type of hard money lender that would see the end result as a benefit for them.



Sohail A. Salahuddin | Group Founder

Innovative Property Consultants Group | Sales and Leasing

http://www.innovativepropertyconsultants.com



Jameson Sotheby’s International Realty

425 W. North Ave. | Chicago, IL 60610 


O: 312.335.3230 | C: 312.437.7799 | F: 847.805.6030

"Locally Known, Globally Recognized"
0 votes Thank Flag Link Sun Nov 18, 2012
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2016 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer