Jack Miller talks about 4 easy and tried and true ways to get 100% financing on commercial and or investment real estate.
“Hi, this is Jack Miller from Gelt Financial. I hope you’re having a fantastic day. I wanted to make this video and talk about how a real estate investor can obtain 100% financing. We get these calls all the time, and it’s a complicated issue. In just, and I’m going to go through four examples that we do fairly often, but I want to preface it and first say that it’s not for every deal. Sometimes we say, “Oh, we do this, or we do that,” and borrowers get frustrated because we don’t do it on their deal, and it’s because there’s a reason we don’t do it on their deal. But let’s, let me start off, and let’s focus on how you can get a 100% financing.
I have to tell you, and just to give you a little background, when I started, I was very young in my teens, and we bought. I started off buying properties with 100% financing, so I did it. I didn’t have two pennies to rub together. I didn’t have one penny to rub together, so we did it by being very creative, and you can be creative if it’s a good deal. If it’s a good deal, it’s the key. So, let’s talk about a couple of common ways, and these are all ways that we do. They’re not abstract ways. They’re not ways that they teach you in school somewhere that’s not practical. These are things that we do at Gelt Financial all the time for real estate investors. So, the first way, the easiest way, and the most common way, I don’t want to say the easiest, is if you already own another property that has equity in it, you can cross-collateralize it or blanket it. So, as just as an example, let’s say you’re buying a property for $100,000. Let’s just say it’s worth a $100,000, and you own a property worth $300,000, and you have a $100,000 first. So, one of the ways we can get you about 100% financing is to put a first on the subject property that you’re buying for $100,000 and then put a blanket loan on the other property that you owe $100,000, and it’s worth $300,000. That’s a common way, and I’m just using round numbers just so you can get the idea.
So, if you own another property with equity and its real equity, not just high in the sky equity, you know, don’t call me up and say, “Oh, we have a property. It’s worth 28 million dollars. It’s really worth 50 grand.” If it really has equity, you could blanket that property and do 100% financing. Very common way. We do a lot of blankets here. We’ve always done a blanket. Some people call them blankets. Some people call them cross-collateralize— collateralization, but we’ve done that for many years, and we’ve made several videos on blanket loans and cross-collateralization lines. So that’s one way. By the way, what we see sometimes is if you do not have a property with any equity in it, but you have a friend or a partner that has a property with equity in it and you find the subject property, maybe you bring someone in the deal as a partner and use their property with equity. So again, you find a great property you’re paying 100 for, argument’s sake. You don’t have any other properties or nothing with equity. You find someone and make them a partner in your deal who has a property with equity. You blanket that or cross-collateralize that easy deal. We do it all the time. So that’s one way, very common.
Another way is, and again, we do it fairly often, is you do a first for us. Let’s say you’re buying a property for a $100,000, and again, in these examples so far I’m using the properties are worth what you’re paying. We’re going to talk about after if they’re worth more because that’s really a fantastic way and probably the best way, but if you’re buying a property for $100,000 and you come to us and maybe, we’ll do a 65% LTV, which is common for us, but you get the seller to do a second for, let’s say, 40%. Let’s just say keep it round numbers. So maybe the seller will hold a second for $40,000, and we’ll do a $60,000 first, or we’ll do a 65% first. The seller will hold for $40,000, and you have $5,000 dollars toward the closing cost. Now, we don’t do that in all cases. We want to make sure that it’s a really good property and you’re committed to it, but we do allow 100% on with seller seconds on some cases. And where we usually make the decision is if it’s a property that we really like and has real value, we’ll do it. If, on the other hand, what happens fairly often—I’m not saying anyone watching this would do it—they find a property it’s worth $100,000, they jack up the sale price to $150,000, and they bring it to us, and they say, “Oh, we’re paying $150,000, the seller’s gonna hold a second for $50,000, we want you to be in for $100,000.” That we’re not going to do. And so, we really focus on what the value is and what our basis is. Again, we’re not going to do it on all cases, but we do it quite a bit, quite a bit. All the time we’re closing deals like this.
And the second thing is we want to make sure that if something goes wrong, that you’re committed to the deal. So, if, for example, if it’s a rehab that requires a lot of work, we may not do that deal because if something goes wrong and you walk, we don’t want a property that’s half done, that’s a rehab. But if it’s stabilized, we may do it. So again, just another tool in the tool chest so you’re aware of. Again, a lot of people make a lot of money getting a 100% financing, including me. We buy real estate, and sometimes I get 100% financing by being very creative this way. Nothing wrong with it all. You just have to have—it’s like anything else—it’s a tool in the tool in your tool chest. You have to know when to use each tool. So that’s what I’m trying to outlay here for you.
The third way, which is really—I think the best or one of the best, they’re all good—I shouldn’t say the best. I don’t want to be favorites to it is buying a property below market value. So, use my same scenario. Let’s say you’re buying a property for $100,000, but it’s really worth $200,000. How does it happen? It happens all the time. We see deals all the time like this because you’re aggressive. You’re buying it—you know, people, you’re in the right place at the right time. You’re passing on 99 deals to get one deal, which you have to do. Don’t think you’re gonna get one for one. You have to probably look at 100 deals to get one. But if you’re lucky enough and if you’re skilled enough, and it’s really a combination of luck and skill to buy a property for a $100,000 that’s worth $200,000, we’ll consider going 100% LTV again. We do that all the time. We financed fairly, recently, actually paid off fairly recently, a guy who’s one of our regular borrowers, a sharp guy, buys properties cheap, bought a property for, I think it was around $100,000—$150,000, something like that. It was a warehouse building near a major airport. It was a long story, it was a foreclosure sale, this and that, but we lent him 100%. We’ve done a lot of 100% deals for this particular guy because he bought it what we thought was 50% on the dollar. We were thrilled to do 100% for him. He was thrilled to get it because he bought it lower than the market value. Again, don’t— market value is a funny thing. Don’t be fooled into thinking the market value is what you need it to be. You really have to dig down deep, and it’s sort of where the rubber meets the road, and I should make a whole other video on market value, but again, I want to focus on 100%. Another way to get 100% financing is to buy a property substantially below the market value. So, when we look at it, we say, “Holy moly, this is a no-brainer.” We would have, what we say is, hope this guy did a great deal. We would have bought the property for what he paid for it. If we say that, then we’re comfortable, and we think you can execute your business plan, then we may be comfortable doing it for 100%. Again, not all cases. If it’s a rehab, again, every deal is a little bit different, so don’t get upset if we don’t do it, but I’m just giving you the broad brush.
The fourth way, which is also common, is don’t be afraid to bring in outside investors as JV equity or prefer or equity or preferred equity or mezz who put up the money, and or if it’s a good enough deal, we’ll put up the money. So again, you’re buying a property for, let’s say, a million dollars, and let’s say you think that property is worth a million three, a million four, but you still need some money down for it, and it’s a good property. Maybe it’s vacant. Maybe it’s a retail center that needs work. Maybe it’s a multi-family. Whatever it is, it’s a value-add deal, and you need three, four hundred grand. Don’t be afraid to go to an investor, you know, and offer them a piece of the deal to put up money. Maybe they’ll put up two, three, four, five hundred thousand, whatever you need as the down payment, as the equity slug or the equity piece of the deal in the capital stack. To put it up again, you’re getting 100% financing, so don’t be afraid to do it or bring it to us. We do that again. We love looking for that. In fact, the past six months, year, we’ve been doing a major push for it. In fact, we’re just, I was just working on a deal before I did, I made this video. I’ll tell you a little bit about the deal. It’s a perfect example. A guy calls me up, the guy is a nice guy. I know him very well. He’s unbankable, whatever reason he can’t go to a bank. There’s a bunch of reasons he can’t get financing, but he finds a great deal with a great tenant in a suburb of a northeastern town. What happened was we put up a 100% of the deal. He didn’t put up any money whatsoever, and he got—we’re charging a rate, self-understood, but we’re also a partner in the deal. So, the way this deal worked is he’s getting 50% of the deal without putting up a dime. So, you could say, “Oh, he’s giving up 50% of the deal,” but he’s looking at it and saying, “Oh, I’m getting 50% of the deal.” So, when you bring in a capital partner to bring in the equity piece, piece of the capital stack, you’re going to have to give up something. But don’t—look a lot of people, you know, they’re overcome with what they’re giving up, and they wound up usually getting nothing that way. I forget the guy’s; I think his name’s Kevin O’Leary. I heard him tell a story. It’s a good story. I’ll tell you. A dog has his dog bow. It’s good. It’s juicy. The dog loves it, and he’s carrying it in his mouth, and he goes to the side of the river, and he sees. He looks down, and he sees a bigger bone. And what he does is he lets the bone go in his mouth to go after the bigger bone. But the bigger bone wasn’t there. It was an illusion. And that’s what people do sometimes. People are scared to give up to get. But don’t be afraid if you want to really be a real estate investor. You’re going to need partners. So, partner up with capital partners, whether it be someone you know, a relative, whoever it may be, or us. We act as capital partners in a lot of deals, and we’re coming up with that equity piece you’re going to give up. But it’s focused on what you’re going to get. So, the fourth way is to bring in a capital partner or Gelt as an outside investor to come up with the equity slope. Again, we’re not going to do it in every deal, but we do it in deals all the time.
So, I think I’ve given you four really, really good ways to get deals. You know, someone sent me an email the other day, and I thought it was fantastic. I mean, it was like Saturday night at 11 or 12 o’clock at night, and I happened to respond to it. I think I couldn’t believe I responded to it so quickly. But it was basically, “I have no money. I have no credit. But I desire.” And he goes, “I don’t think you’re going to want to do business with me because I’m a total mess on paper.” And I wrote back, I said, “You know, you have the main thing. You have desire. So, if you have desire, and that’s what you really need, you could learn everything else. You could acquire the capital. You’ll align yourself with a good capital partner. So, if you really have the desire and the passion to do it, that’s 90% of it. You’ll get the knowledge. You’ll get the capital. Believe me, the capital is the easiest part. I’m pitching Gelt Financial for equity in debt, but that’s the easiest part. There’s a million companies out there like us. You have to have the inside fortitude to do it, and you can’t be afraid to get rejected 20 times or a hundred times and to look at 100 deals and to really sweat it out and lose it. But you’ll do it. So, there are ways for you to get 100% financing. Again, to go back real quick, I’m going over my time limit. I’m really don’t have a time limit but giving myself one. Blankets and cross-collateralization, seller seconds, buy below market value, and bring in outside capital or let us be your outside capital. Again, four fantastic ways. I hope I helped you. Again, if you have the desire, that’s the only thing you need. The desire. You can overcome everything else. You can get everything else. All the tools are out there today. You can do it. I know you can. And really, that’s the greatness of the real estate business. Anyone can do it. Believe me, if I could do it, anyone can do it. I have no great skills. I’m just, I’m a total mess. Anyone could do it. If I can do it, you could do it too.
Like the YouTube channel, like the video. If you have questions, leave them. We try to answer the questions. Give us a call at 561-221-0900. Check us out at geltfinancial.com. And again, we’re looking to do deals. We’re looking to partner with good quality people. We’ll put up the money. You don’t need the money. You find the properties, and you do the work. We’ll put up the money. But again, that’s not on every deal. And don’t be discouraged if you call us up and you run us one or two deals, and we say no because we’re seeing something in the deal that you’re not seeing, and it’s called experience. And the reality is, we’ve lived through a hard time. So, everything’s not great. We know what it’s like to live through a bad economy. And that’s really how we underwrite. Anyway, I want you to have a great day. I hope this YouTube video helped you. And take care, and remember, don’t forget to like the YouTube, hit the bell or the buzzer so you’re notified of more. Thank you, have a great day.”
Category: Borrowers
Tag: 100% financing
