The answer is “yes,” but is it for you?

Finding the right financing option for your real estate investment project is crucial. One unique product in the private lending space is 100% financing. Many real estate investors are surprised to discover it is an actual product.

Like every other lender, 100% lenders ensure you have the qualifying liquidity, credit, and adequate equity to recover the asset in the event of default. The primary difference is that 100% lenders go one step further: underwriting with your cash flow or income as a qualifier. Doing so provides extra comfort the asset is secure and you will succeed.

Why 100% Financing?

The objective of 100% financing is to fund the entire property purchase price and rehab costs without requiring any down payment. This means you keep as much cash in your pocket as possible to invest more in renovation projects or put in the bank.

Although 100% financing is an excellent choice for seasoned investors, your must evaluate your back-end strategy too. Are you a fix-and-flip investor, a buy-and-hold investor, or both? Having the right margin to sell at a profit or cash out as a BRRRR investor means calculating an effective ARV (after repair value) or having cash reserves. A loan that combines 100% of purchase and rehab with a higher ARV will help ensure you have enough funds to transform fixer-uppers into dream homes at significant profits and ensure affordability.

Plus, 100% financing can create higher returns. By leveraging the lender’s money, you can take on rehab projects that might otherwise be too ambitious financially.

Traditional loan down payments of 10%-20% or more can pose a significant hurdle for borrowers. With 100% financing, you still pay closing costs and maintain interest reserves, but you have no down payment. A random sample of loans in the past three months compared to our competition showed that 100% financing saved borrowers $20,000-$50,000 at closing.

Cost Versus Benefit

Every month, we get hundreds of inquiries about 100% financing. Some ask if it’s for real, or even, “What’s the catch?”

RFG’s promise: There is no catch. It’s simple math. Supplying a few extra documents can save you thousands. Here’s how.

  1. Underwriting is based on common-sense decisions. You must show the income or cash flow to support your current debt plus your new 12-month loan. If you can’t supply tax returns and bank statements, then you’re not a candidate for 100% financing. We look beyond the bottom line you report for tax purposes to ensure you have enough free cash flow to cover your debt.
  2. The rate is higher for 100% financing, but still, the savings are significant. A new or experienced investor might have to put 10% to 20% down on a typical short-term loan. With 100% financing through RFG, they could save $25,000 – $50,000at the closing table. Even if rates are 1.5%-1.75% higher, payments are only $500 to $1000 more monthly. At full term, that‘s $12,000. Still cheaper!

We don’t hide our higher pricing and requirement for more documentation. But our 100% product is for investors to preserve cash and invest safely in real estate.

Categories | Article | Funding | Sponsored
Tags | Funding | lending
  • John Santilli

    John joined RFG in July 2019, and is responsible for all opportunities connected to the growth of RFG. He is focused on expanding the company’s sales channels to maintain their position as a leader in rehab financing. Prior to joining RFG, John had 25 years of lending and marketing executive leadership experience across multiple private and public marketing-dependent companies. He had managed companies from start-up to maturity ranging from $2.5M to over $50M in annual revenue. John earned a Master’s Degree in Management from the University of Pennsylvania and a Bachelor’s Degree in Business Administration with a concentration in Marketing from Drexel University. He currently resides in Wynnewood, PA, with his three children, and enjoys family first, live music, and finding the perfect balance of work hard/play hard.

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