Jack and Marcy go into detail on how to get 100% financing on Commercial and investment real estate. There is a lot of talk about this, but we drill down and talk about details on how to do it.
“Jack: Jack and Marcy at Gelt Financial, so we want to talk about what is 100% financing and how do you get to it, you know? When we put out 100% financing, we put with additional collateral. I think that’s—we get more calls on that.
Marcy: We do, but honestly, this is my favorite loan to do. I love doing 100% financing loans because it’s like a puzzle, putting different pieces together to get what the borrower needs.
Jack: So, let’s talk about what we can do but what we can’t do too. First of all, I want everyone to know a disclosure: we can’t do 100% financing on a lot of deals, so don’t be mad at us. I’m telling you upfront, okay? Some deals we can, and I want to describe a couple of deals that we’ve done recently, and you’ll hopefully start to get the point. Hopefully, we put out these educational videos self-understood. It’s a little self-promotion. We want business out of it, but we want to educate. Really, we’re passionate about commercial real estate lending; we want to educate people. So, two deals I can think of, and my numbers may be off, everyone, but you’ll get the point. The first deal was a, I believe, a lady who was a beautician or a hairstylist, whatever, and she worked in her home, and of course, she didn’t verify her income.
Marcy: No because it’s all—it’s pretty much all cash.
Jack: Yeah, she was buying a property for like let’s say $175,000, and we lent her $187,000. So, we lent her 115% or 110% of it. Now, how do we do that and why do we do that? Because she also owned a house that I think was worth.
Marcy: And it was worth $225,000.
Jack: $225,000 that we also took as collateral. So, in our eyes, we look at loan-to-value a little different. We look at and say, what’s our leverage and what’s our risk? So, we looked at it and say $225,000 plus $175,000 is $400,000, and we lent her $187,000. So, our leverage point was lower than 50%. She and the mortgage broker and the realtor looked at it and said, hey, I’m buying a property for $175,000. We’re lending her $187,000 or whatever.
Marcy: So, we covered 100% of the financing of the purchase.
Jack: And I think we lent her a couple of grand to fix it up. So, that’s a perfect case by using cross-collateralization and blanket loans, which we do. I’m a good 30%, 40%, 50% of our deals.
Marcy: I mean, the blanket loans are very creative. I mean, they really are because we can, as long as we get equity out of whichever property to do the deal, that’s what we care about because we’re collateral lenders.
Jack: Yes, and Marcy brought up another good point I forgot about before. In that case, we took a first on our property, but we also take seconds on properties. So, in that case, she didn’t have a mortgage; it was pretty easy. But we do them where they have seconds. So, that’s a clear way where a borrower can get 100% financing. They’re happy, and we can get our low leverage. Remember, our goal when we speak to mortgage brokers, realtors, and borrowers too is to solve their problems, present an offer, present them with something that other people don’t or can’t do. We’re not the cheapest guys in the world; we tell people that.
Marcy: But we a niche in the market, that’s what he did.
Jack: We have a niche, so when we can solve someone’s problem, we’re helping them, and that’s what we do. So, we’re always trying to think of creative ways. So that was a creative way. Another deal I think we closed like the same week, coincidentally around the time, I think it was—Grand Rapids in Michigan. Grand Rapids, Michigan, a doctor and her, I think it’s her, his son, whatever. I’m gonna say four or five years ago; I don’t remember exactly when entered into sort of like a master lease. Not an installment sale is a weird master lease agreement on an office building. It was a decent-sized office building, and they had agreed to buy it for, let’s say, 800 grand. Again, my numbers may be off a little bit. So, they come to us for a loan, and we looked at it, and we thought the building was worth like a million two. So, in this case, we lent them the 800 000 because they had—when they first signed this master lease, the building was vacant; it was a mess. They stabilized it. So, you know, it was to them; it was 100% financing. To us, it was probably a 60% or 65% leverage point. So that’s another example of how you get to 100% financing. A couple of other examples are seller seconds, right? And another good example, and again, we don’t do it on every deal. We try not to do it on fix and flips. But if a person is buying a property for, let’s say, a hundred thousand, and let’s say it’s vacant, and we did it. There was a guy, I don’t want to mention his name, but a good customer of ours. He was buying a property in Chicago right outside the airport. It was a vacant warehouse building. I think he actually paid a hundred grand. I think it was a hundred grand, and he found a tenant who was going to move in paying 3-4 grand a month, and we—
Marcy: Right, so think about that, the loan amount, and then now we have income coming in the property.
Jack: Yeah, we lent this guy 100% financing because we thought the property was worth three or four hundred with this new tenant. Oh, we just also closed the deal in Vineland, New Jersey. It was a JV equity deal. It was a mortgage and a JV equity deal. I think we went by investors 20 on it. The guy had gotten a non-profit tank, bought a vacant funeral home, had gotten a non-profit tenant very large. They did like five million dollars a year in business, very profitable, been around for 20-30 years, and he secured them as a tenant. So, we looked at it and said it really wasn’t worth 500 grand because he added value by adding the tenant. We lent him the full purchase price and the rehab because we thought it was worth closer to a million— million, million two. So, they’re just a couple of ways we can do the 100% financing. We try to be creative about it. We again, we don’t always do it, but we try.
Marcy: We try. I mean, there’s all different ways to work deals too because we even have done like we’re leased sale backs, like where we close it in one of our LLCs, and then we rent it to the borrower. And then when they’re ready to take us out, they pay us back, you know. There’s all different ways of working a deal.
Jack: And we try to make it work anyway. So that’s a story on 100% financing and how to get there. Again, I also have to say that all these people who—I talk to a lot of—I don’t know if you talk, I’m sure you do, to real estate investors who are buying all these courses, oh, how to get rich by 100% financing.
Marcy: Just watch our YouTube videos.
Jack: Watch our YouTube videos. Don’t listen to these people who are charging you. We’re living it. Okay, like us, like the YouTube, like the channel, leave your comments, we’ll answer them. Self-understood, we’re looking to do deals. We do deals in, I think, 42 states, 50,000 to 5 million. Give us a call, we’re looking. Check us out at geltfinancial.com or call us at 561-221-0900. Most importantly, have a wonderful day.”
Category: Education
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