No Money Down
This means no down payment to purchase investment property. Many investors are longing for the old days that hard money and bridge lenders would lend based on the equity of the property only. Those where the days of uncontrolled appreciation and values continued to rise beyond any logical means. Those were the days that novice investors thought that there was no way to lose money investing in property. The reality for many years there was no investment with a greater return than real estate.
The Bubble Burst
Then the out of control rising of property values hit a ceiling, the bubble burst and instead of appreciating residential and commercial property began to lose value. As banks and conforming lenders lost money during this “mortgage crisis” so did private lenders and hard money funds. The response from the banks and conforming lenders were to tighten there lending requirements. Private and bridge lenders did the same. The number one thing was to require buyers to have skin in the game. That is investors were required to actually invest money in their projects.
More important than asking buyers to participate in their investment, private lenders who provide short term funds to R.E.I.s (real estate investors) became more strict in ensuring their clients would have a solid exit strategy. To ensure this they began to make sure the R.E.I.s would qualify for take out financing. As conforming lenders reduced their loan to values, increased the credit score requirements and generally tightened their underwriting requirements, hard money and bridge lenders had to do the same. The R.E.I.s are tasked to have an exit strategy that is above reproach. To be a successful investor you must have a fool proof plan to pay off your short term lender and move into permanent financing.
Chicago Commercial Real Estate Investors
Throughout the country many hard money lenders pulled out of the market amidst mounting losses due to property values going down and R.E.I.s unable to sell or refinance the properties. As the market stabilizes and private lenders understand the new realities of financing today they have come back into the market. I have found legitimate bridge lenders that would lend up to 100% of the cost to purchase and rehab commercial apartment buildings in the Chicago Area.
Purchase Rehab Private Financing Guidelines
Though the guidelines are different for every private funding source these guidelines are representative of many lenders have polled in Chicago.
- Credit Score: 650 to 680 or higher
- Assets: 3 to 6 months of mortgage payments or more
- LTV: from 50% ARV to 75% of ARV depending on the property
If you qualify for these guidelines you may be able to purchase commercial apartment buildings with little or no money down.