Regular banks view investment loans as a higher risk. They reason, if the owner is not living in the property, in times of trouble they believe, an investor will opt to pay their own home mortgage first, with less consideration to the investment mortgage. This puts the bank in a very bad position. 100% financing for investment property is difficult to come by to say the least. VERY few lenders will even consider it.

If a lender will consider 100% financing, the requirements are hefty. You need top notch credit, access to at least 6 months of mortgage payments in liquid funds, 2 years full income documentation, and that's not mentioning the property requirements.

That being said, real estate investors still are not advised to use their own money to do their deals. Even if you have 10-20% saved for specifically for a down payment on your investment property, most real estate guru's warn, NEVER spend your own money on real estate investments. Most beginners start their investment career saving up for a down payment, but the fact is, a serious real estate investor does not use his own money to do real estate deals.

There are a couple of reasons for this...

1. Savvy investors always want their money somewhere where it's working for them, yielding interest and making more money.

2. If you are serious about investing, you're going to be buying multiple properties, higher priced properties and eventually apartment buildings or commercial property. The fact is, if you're paying 10-20% down on every deal, you're going to run out of money fast, even if you have A LOT of money. When you're ready to move on to the next good deal, and all of your money is tied up in your other property(s), and you're going to lose out on possibly a really good deal.

So HOW THE HECK do you buy a property without a down payment, if its so incredibly hard to get a loan???

Buying real estate without using your own money IS possible, and it's not difficult. With the right kind of deal, investment property can be purchased without a single penny of your own money.

Enter the world of Private Lending?
There are private lending companies that will give you every penny you will ever need for your real estate investments. Imagine having all the funds you need at your fingertips. If you're finding the right kind of properties, you should never have to miss out on a deal again. After learning how to use a private lender to fund your deals, your business will flourish. Whether you're brand new at investing, or a seasoned investor, all investors should learn how to use a private lender to fund their deals.

There are a few tips to getting financing from private lenders:
You will need to make sure your deal conforms to their standards. There are specific property requirements that will need to be met. But you'll be happy to find that a private lender cares mainly about the value of a property, and not how high of a risk you are. This means that you could have mediocre to poor credit, and you will still get your financing and knab that incredible deal.

Note: You will however, want to stay on top of your credit, as good practice. You'll also want to keep some of your money in a bank account, where the lender can see it. (Private lenders usually have a 'just in case' standard in terms of available dollars on hand) This makes you look more responsible. In general, good credit and a decent amount of money in the bank is a sign that a person takes care of their responsibilities. It's a matter of trust. They want to know that you have the ability to get the deal done the way you have agreed to, and they will be repaid at the end of the loan term.

Private lenders offer short term loans for investment, usually six months to a year, possibly longer for larger projects. They lend at 65%-70% of the properties after repaired value (ARV) from the appraisal. If you are serious about investing in real estate, you really need your deals to be within this range for maximum profits. Here's and example, if you've found a property for say $40,000, but it's really worth $100,000 either right now, or after it has been rehabbed, a private lender will give you $65,000 to purchase and repair the property.

Most likely they will also roll closing costs into the loan, so you're coming to the table with no money to close. The lender typically will charge points which is included in their closing costs (a fee paid to the lender for doing the loan, calculated in a percent of the loan amount. 1 point = 1%) Interest rates range from 13-18%, which is really not very high for a short term loan.

Points and high interest is a very small price to pay for having all the money you need right at your fingertips any time you find a good deal. Every investor knows time means money. The good deals go fast, and you need to move on them fast, or they will be gone in the blink of an eye.

If you plan on keeping the property as a rental, it's incredibly easier to refinance into regular bank financing, and pay off the short term loan, than to try to get all the money upfront from a regular bank. There are usually no prepayment penalties to paying off a private lenders loan before the end of the term, so in any case, private financing is the way to go for a real estate investor. Hard money loans are quick and easy, and can really get your real estate business off the ground.

I use a specific private lending resource for 100% private funding online very quickly because of it's ease of use and limited document requirements. Also because the site also includes an automated, signed and valid Proof of Funds Letters for borrowers that have already been pre-approved. It's a great tool to when you need to move on a property FAST.

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