OPM: How to buy houses with none of your own money
Sounds crazy right? Well, it’s completely achievable with the help of OPM.
Other People’s Money
How do you access OPM? You could reach out to everyone you know and try to borrow money from them… but that can lead to more trouble than good. You could go to a bank and ask for a loan but if you have rough credit or the property doesn’t fit specifically into the set criteria of that bank, you won’t get approved. The quickest way to capitalize on OPM is through Private Money lenders! Private Money lenders lend more than traditional banks. You can fund an entire fix-and-flip with many Private Money lenders. Most rates vary from 6 to 15-percent with the points (upfront interest) ranging from 0 to 5%.
So where do these Private Money companies get the money to then give to you? They use OPM too! Private Money lenders are not banks, they borrow money from Investors at a certain rate. Private Money lenders focused on loan programs can vary from short-term single-family residence loans to 30-year amortized loans, it just depends on the company you find. Many Private Money lenders will lend on the ARV (after repaired value), not the purchase price. That means if a house will be with $150,000 when it is fixed up, they would lend up to 70 percent (percentages will vary) of the fixed-up value, not what you buy the home for.
For example, if you buy a flip for $100,000 and it will be worth $150,000 when it is fixed up, the portfolio lender will lend $75,000. If a Private Money lender will loan 70-percent of the ARV, they would lend $105,000 on that same property.
Depending on the Private Money lender, your closing costs may or may not be included in the loan itself. This may include insurance, property taxes, utilities, or HOA dues. The majority of Private Money lenders give you money through a draws process. That means there is a set schedule of what repairs will be done for a certain amount of money, and once they are complete the Private Money lender will release money in “draws”.
So overall there are a lot of factors that you’ll have to think about when using OPM. The best way to learn more about using OPM is to reach out to Genesis Housing Services. Genesis can offer you a pre-approval letter for buying real estate investment properties!
If you want to find out about how to get better rates on your loans check out the education you can receive with Genesis Housing Services, call us at 480-535-1950. If you have a deal and would like to get a loan quote from Genesis, visit www.religiousaboutlending.com