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REAL ESTATE no money down + not using investors credit?

ryanpal

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Jul 26, 2007
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morning everyone,

one of the investors i'm networking with wants to purchase apt complexes with no money down and not using his credit. he wants the track record of the building to be used.

now i try to believe "anything is possible", but how realistic is this? does this ever happen and if so, what is the likelihood of doing this now?

ryan
 

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RealOG

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Aug 20, 2007
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Depends on the size of the apartment building, but most banks understand that an individuals income is not an underlying factor in what establishes stable loan repayment. The performance of the building is what establishes that.

Banks look at the rents, vacancy factor, historical numbers (how has the building performed in the last few years), repairs, lease terms, etc. Your credit can come into play, but typically not for the same reason a residential lender would use it - the commercial lender probably wants to see your history as a borrower. A lot of things can show up on your credit report beyond the raw score (judgements, place of residence, etc.). They will look at your history as a successful investor (have a resume ready) and will want to see how their loan will be secured - if not by your own money, then by who? They will also want to see a reasonable amount of reserve funds. ("No money down" doesnt necessarily mean "no money whatsoever").

That said, some banks will still come after you to personally secure the loan. Just another way for them to mitigate their risk.

This is what I encountered when getting my first commercial loan.

RealOG
 

yveskleinsky

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Why is this guy one of your investors? What is he bringing to the table?
 

JScott

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I don't think Ryan was implying that this was someone he was investing with...it's someone he is networking with, and Ryan is trying to validate his methodologies...

Correct me if I'm wrong...
 

yveskleinsky

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Sorry, that came across as snappy- didn't mean for it to!

I would say if you are considering moving forward with this guy in any respect, make sure that him (or any partner) brings complementary skills to the table.

As far as looking at the deal, that's a SteveO or Andviv question. Looking forward to the answer! :)
 

andviv

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I've heard about this deals... it seems it is possible to get something like this with no money from the buyer if the seller will finance a big chunk of it and the bank put the rest... in my case has been more conventional... 20 or 25% down. From what I been seen in the market these days, the lenders do want you to have some skin in the deal... they wanna deal with pigs, not the chickens (pig gets in the deal to provide the bacon, chicken just puts the egg, nothing to lose). If the track record supports a deal like that then probably the property would command a very good price.

So what I am saying is, it is possible, not that probable. I do know that SteveO gets into deals with 0 of his money (investors and the banks put up all the money but his track record is the one making the deal happening).

Added: So, it is the track record of the Manager, not the track record of the building, that would make this possible.
 
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ryanpal

ryanpal

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Read Millionaire Fastlane
Jul 26, 2007
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thanks for the replies guys.

yveskleinsky, this is somebody i'm networking with with intentions to possibliy invest with in the future. as some of you know i've been pursuing the preforeclosure/foreclosure market. my goal is to gain enough capital to do apt buildings for positive monthly cash flow.

one of the investors i've been networking with mentioned he was going to pursue apt buildings. although this is a little earlier than expected, i figured i wouldn't count it out if i could do it at an earlier stage. so on that note i figured i would start reading the book SteveO recommends (vollucci's how to buy apt buildings) and hopefully use the resources available on this forum to help me along.

so thats how i'm where i am now.

in short, what does this investor bring to the table? good question. i will be able to validate more of his credentials in the upcoming future. as of now he has rei experience, contacts in the making, and a track record with short sales (what i was originally networking with him for).

hope that clarifies ;]
 

SteveO

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I have seen no money down deals. There are some incredible opportunities with these when they do come up. The good part is that they tend to show up in distressed situations in locations that I look for.

There is a catch though! They will look at the buyers ability to run and manage a property. This will only be visible though a strong track record of turning poorly managed properties into money making machines. They will probably look at your credit as well.

There are a number of scenarios where a deal may be given to you with little to no money down.

  1. Seller is losing money and wants an out.
  2. Lender is looking at options to aviod property coming back to them
  3. Private investor wishes to make money using a hard working manager

There may be more situations but these are the ones that I have seen.

In all of these cases, they are going to seek out a known person or entity that can save them. In the first case, you will likely be taking on the negative cashflow and need to be prepared to sink money into operations and improvements.

To get someone to hand over a large asset to your contol, they will need to have a lot of confidence in you.
 

KyJoe

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Aug 28, 2007
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hey SteveO, nice to have you join in ;]

so for a someone new like myself (no lengthy track record) i would have a hard time landing a deal like this. unless of course i had a more seasoned investor hop on board.
Not necessarily, when someone wants out they will grab at anyone. Just try to see what they are seeing before you jump.
 

randallg99

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Aug 9, 2007
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...The good part is that they tend to show up in distressed situations in locations that I look for....

Steve,
are you finding more distressed situations than in prior years?
 

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SteveO

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No, but let me explain.

Since my SOP is to find locations that are having difficulty, I will usually be seeing properties that are in trouble. Usually, the situation is beginning improvement when I move in to a market. I try to hit it before the owners recognize the magnitude.

There are always going to be cycles in any given area when it comes to apartments. Many parts of the country are seeing improvements in rents and occupancy. There are less home buyers and more renters these days. The exception is where there was a lot of overbuilding of single family homes. This caused a glut of rentals that are usually not tracked by the apartment communities.

Some locations have just plain overbuilt apartments. These are tracked and part of the normal cycle that I watch.

Some locations that were performing well in both the rental and sales departments saw a lot of condo conversions. These locations became overpriced quickly. There may be some real opportunities to purchase from these owners as they come to the realization that the condo sales are not working. Renting those properties for cashflow will be very tough. I have been monotoring some of these but haven't seen enough motivation yet.

Overall, I believe that there has been a general improvement in the national rental market.
 

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