Can you buy an investment property with a hard money loan and no money down? On a purchase, almost never, and when an offer says you can, the cost has usually moved somewhere you are not looking. That is the honest answer. The useful answer is that you can bring a lot less cash than most investors assume, if you know which caps apply and which levers are real.
Here is why lenders need your money in the deal, what each of our programs means for your cash, a worked fix and flip example with the arithmetic done, and the structures that genuinely reduce what you bring to closing. Everything here is about business purpose loans on investment property. A home you will live in is a different loan with different rules, covered at the end.
Why lenders need your money in the deal
A private lender is not being stubborn when it asks for a down payment. Your cash does two jobs that nothing else in the file can do.
It keeps you committed. An investor with real money at risk manages the budget, pushes the contractor and finishes the project. An investor with nothing at risk can walk away when the numbers turn, and the lender is left holding a half-finished property.
It absorbs the first loss. Markets move, renovations overrun and some properties have to be sold in a hurry. Selling costs, carrying costs and the time it takes to recover a loan are all real. Your equity sits between the loan and those losses, and it is the cushion that lets a private lender approve a file in days rather than weeks.
A loan for 100% of the cost has no cushion. A lender that offers one is either pricing that risk into the rate, the points and the fees, or taking it back some other way. That is why “no money down” is usually a sign of a bad structure rather than a good lender.
What our caps mean for your cash
Every program has a leverage cap, and the cap sets the minimum you bring. Here are ours, before closing costs:
| Program | Published cap | The least you bring |
|---|---|---|
| Fix and flip | 85% of the purchase and 100% of the rehab, with the whole loan within 75% of ARV | 15% of the purchase, more if the ARV test binds |
| Bridge | 75% LTV (70% on commercial property) | 25% of the value (30% on commercial) |
| Ground-up construction | 80% LTC, covering the lot, the build and the interest reserve | 20% of the total cost |
| Rental DSCR | 80% LTV | 20% of the value |
Three points about that table.
The rehab can be fully financed; the purchase cannot. Our fix and flip program funds up to 85% of the purchase price at closing and holds back up to 100% of the renovation budget. So the renovation can come entirely from the loan, but at least 15% of the purchase comes from you, and the total loan still has to fit within 75% of the after-repair value. All three tests apply at once and the lowest result wins, which our post on LTV vs LTC vs ARV explains in detail.
DSCR loans are not always 20% down. Our rental DSCR loans go up to 80% LTV, so 20% down is the minimum at the cap. When the rent only just covers the payment, the loan may be sized below the cap so the payment fits the rent, and then you bring more. The coverage ratio we require is quoted per deal; the rental property loan page has the rest of the published terms.
A cap is a ceiling, not a promise. Leverage is set below the cap when the property, the valuation or the exit calls for it. Plan your cash as if you will get a little less than the cap, and treat the full cap as a bonus.
A worked example: $500,000 purchase, $100,000 rehab
The numbers below are an illustration only, round figures chosen to show the arithmetic, not a quote. Say you buy a house for $500,000, budget $100,000 for the renovation, and closed comparable sales support an after-repair value of $750,000.
Step 1: the loan at the purchase and rehab caps.
- 85% of the $500,000 purchase: $425,000, funded at closing.
- 100% of the $100,000 rehab: $100,000, held back and released in draws.
- Total loan: $525,000.
Step 2: your share of the cost. The project costs $600,000 ($500,000 plus $100,000). The loan covers $525,000, so you bring $75,000, which is 15% of the purchase price.
Step 3: the ARV test. 75% of the $750,000 ARV is $562,500. The $525,000 loan fits under it (it is 70% of the ARV), so the purchase and rehab caps are the binding ones and your share stays at $75,000.
Now change one number. If the comparable sales support an ARV of $650,000 instead, 75% of it is $487,500. The loan is capped there, $37,500 below what the other two caps allow, and your share of the cost rises to $112,500 ($600,000 minus $487,500).
Your share of the cost is not the whole check. On top come the closing costs (points quoted per deal on the Letter of Intent, plus title, escrow and the valuation), the carry for the months you hold the property and a contingency on the renovation. The rehab money also arrives as a reimbursement: the work is done, inspected and then the draw is released, so you need working capital to front each phase. Our post on how much money you need to flip a house walks through those costs, and the hard money loan calculator runs your own figures.
What legitimately lowers the cash you bring
Finance the full rehab. On our fix and flip program the renovation can be 100% loan money, the biggest single reduction available on a flip. Interest is charged only on the funds drawn, not on the whole commitment, which keeps the early payments down.
Use equity you already own. If you hold a property with equity, it can do the work your cash would otherwise do. A blanket or cross-collateral loan puts one loan across more than one property, so the equity in the property you own helps secure the new one. Our blanket loans start from 8.99% with terms of 1 to 3 years, and the leverage is quoted per deal once every property involved has been valued. The cost is that every pledged property is on the line if the new project goes wrong, and getting one released early depends on the release terms. Our posts on cross-collateralization and blanket loans cover both. The other route is a cash-out bridge loan on the property you own, at up to 75% LTV.
Bring in a partner. A joint venture partner can supply the cash in exchange for a share of the profit. That lowers your cash and your return, so compare the partner’s share with what the debt would have cost. Expect the lender to ask who the partner is and where the money comes from, because proof of funds applies to the cash side of the deal whoever supplies it.
Ask the seller to carry a second. A seller carry-back can cover part of the gap as a second loan behind the first lender, but only if the first lender allows a second lien. Lenders decide that case by case, and the combined debt still has to make sense against the value and the exit. Raise it with your lender before you write it into the purchase contract, not after.
Buy better. A lower price against the same finished value is the lever investors forget. Your 15% is 15% of a smaller number, and the ARV test is less likely to bind.
What does not lower the down payment
An interest reserve. An interest reserve sets aside part of the loan to cover the monthly payments for a set period, so you are not writing a check every month while the work is under way. It reduces your monthly cash, not your down payment: the reserve is part of the loan, and the loan still has to fit the same caps. On our construction program, for example, the 80% LTC covers the lot, the build and the interest reserve together.
Closing costs. Points, lender fees, title, escrow, recording and the valuation still apply on a highly leveraged loan, and they are paid at closing on top of your share of the cost. Ask for every figure in writing before you sign.
How to read a no money down offer
Some offers do advertise 100% financing on an investment purchase. As general advice, read them for where the cost went. It is usually in one of these places:
- Points and fees added to the loan balance, so you owe more than the cash you received from day one.
- A second loan stacked behind the first, often from the same source, at a higher rate and with its own fees.
- A profit split or equity share, described as a partnership.
- An upfront fee collected before you see written terms.
- A valuation stretched to make the leverage work, which leaves you no cushion when you sell.
The test is simple. Ask for the total cost in writing, then compare it with a loan where you bring the cash. If the no money down version costs more than the cash it saved you, it was not a saving.
If the home is one you will live in
Zero down does exist, on a different kind of loan. For eligible veterans buying a primary residence, our VA home loans go up to 100% LTV with no down payment. That is a consumer loan on the home you live in, handled through our owner occupied program under consumer rules, and it is not a way to buy a flip or a rental.
Run your numbers, then call
Take the purchase price, the contractor’s budget and an ARV from closed comparable sales, apply the three fix and flip tests and use the lowest result as your loan. Our fix and flip rates run from 9.99% to 12.00% on terms of 6 to 18 months, with loans from $250,000 to $10,000,000 and first time flippers allowed. Rates are subject to change and every loan is subject to underwriting. If the property is local, see fix and flip loans in San Diego. When you have a deal, send a loan request or call (619) 617-2797, and we will tell you what it needs from you before you sign anything.
