Can I Put No Money Down?
We get this question a lot.
Many real estate investors are looking for ways to put no money down on their next deal. Is this realistic? In today’s market, probably not. Most lenders want to see their clients have some skin in the game.
But, for investors with some experience and solid financials, there are ways to get pretty close. Here at Navigator Private Capital, we offer 90/100 financing for many of our fix-and-flip clients.
But what exactly does 90/100 financing mean?
When it comes to renovating a distressed property, there is value not only in the house itself but also in the repairs to be made. With 90/100 percent financing, we will fund up to 90 percent of the property’s purchase price PLUS 100 percent of the repairs needed to fix it up.
Of course, this assumes that the total loan amount falls within our LTV (loan-to-value) parameters. For our fix-and-flip program, that means the loan can’t exceed 75% of the ARV (after repair value).
Have we lost you?
It may be easiest to run the numbers for a hypothetical project. So, let’s say you’ve done the legwork and uncovered a distressed property with fix-and-flip potential. The property is in foreclosure and is a steal for $100K.
So that’s the first part of the equation—the purchase price. But now you’ve got to figure out just how much money it will take to renovate the property. This is where it pays to consult a licensed contractor and create a Scope of Work (SOW) for the property. The SOW lays out a plan for turning that diamond in the rough into a real gem. It should include detailed estimates for the repair work priced at current market rates. For this example, let’s say the repairs will be $40K.
You’re nearly there!
Now that you know the property’s purchase price and the cost to fix it up, you can calculate the minimum ARV you would need to secure a loan with us. Going back to our example, that means that a loan of $130K would only make sense if the estimated ARV is at least $173K, which is the $130K loan amount divided by .75. So if you (and our appraiser) think the market will support a selling price above $173K, you're in business!
The point is that there needs to be enough upside potential in the property to make the whole endeavor worthwhile for everyone involved. We are investing in YOUR success and are fully committed to ensuring the profitability of every project in our portfolio. Our track record bears this out.
Are you interested in learning more about our loan programs? Have questions or need more information? Reach out to your loan officer or give us a ring at 888.444.3160 to be put in touch.