Ask Cornerstone: Can I raise a down payment for a flip from a private money lender?

Borrowing loan deposits

I would like to get a loan for a flip from a conventional bank, but I don’t want to put any money down.  Is this one of those cases where, without “skin in the game,” I won’t get approved?Do I have a better chance with a portfolio lender?  

I’m trying to leverage as much possible to have to come up with the least out of pocket as possible.

Yes, your assumption about needing “skin in the game” is correct.   The bank will see / know that you are recording a second on the property, and therefore are putting the down payment from a loan.  The same is true through a private money lender. They will not lend without a down payment.

You can solve the problem by partnering with someone on the project that provides the down payment. Finding a partnership has its own issues to overcome as well.

A partner will want to have good evidence that the project is not high risk.  To show that, you need to demonstrate proof in a few areas: your experience, the property’s excellent price, fix-up costs, project timeline/schedule, market analysis, a profit projection, and a margin of safety. Family or friends may as partners not require as much but it is best to plan your project in this way regardless.

If this is your first project, you may not be able to find a partner even with all the other evidence. Experience is a big factor in lowering project risk.   The best way to overcome a lack of experience problem is simple.  Find excellent property and partner up with an experienced flipper. If you do that once or twice you will be on the way flipping properties yourself.

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