How to Acquire Investment Properties with No Money Out of Pocket, regardless of Credit and Income

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Издатель Oct 4, 2024

How to Acquire Investment Properties with Zero Money Out of Pocket, regardless of your credit, income, or experience...

1. Seller Financing: When purchasing a property, I negotiate directly with the seller to finance at least 70% of the deal with low-interest (3-5%) for 2-3 years. This allows for more flexibility and better terms compared to traditional bank loans, making for a more seamless and profitable transaction.

2. Private Lenders: For the down payment and property improvement costs, I borrow from my network of private lenders. This gives me the capital needed to upgrade the property, add value, and boost cash flow—all without using my own funds.

3. Value-Add & Stabilization: Over the next 2-3 years, we focus on improving the property and stabilizing it by increasing occupancy, cutting unnecessary costs, and enhancing management, thereby strengthening the property's cash flow - which enhances the value.

4. Refinance with DSCR Loans: Once the property is stabilized, we refinance using a DSCR (Debt Service Coverage Ratio) loan. These loans are determined by the cash flow of the property, rather than the personal credit and income of the borrower. Typically, banks look for a DSCR of 1.2 or higher, meaning the property generates 20% more income than the required debt payments. Some lenders may require higher ratios depending on the risk level of the property and market conditions. The standard LTV (loan-to-value) is 75%, just like conventional loans, meaning the bank will lend 75% of the value.

5. Exit Proceeds: the best part is, once I have enhanced a $1M property into a $2M property, and then borrow 75% of the value, I gain access to upwards of $750k in exit proceeds / equity, while also consolidating my debt and keeping the asset long-term to continue enhancing the cashflow and value so that I can do it all over again in a few years.

Interested in learning more or partnering on a deal? DM me for more info!