What Steps Should I Be Taking?

Question

Hello everyone! I am currently seeking some guidance from those of you who are more experienced than I am. I currently do not own any properties, but have spent months and months educating myself on real estate investing through BiggerPockets books, podcasts and other sources of information. I truly want to obtain financial freedom through real estate and I am dedicated to this as a life goal. I want to purchase my first multi-family property in 2022, but my main issue right now is on the financing part. I have the hustle and I have the knowledge (at least a good foundation), but I'm not sure where to start. My original plan was to house hack my first property, but seeing that I live in Santa Clara, CA where it is extremely expensive to buy, this will not be an option. I have instead turned to looking out-of-state for a property 4 units or less. I currently have only $5,000 in cash which I know isn't much, but I am looking for any input on creative financing options or how I can do this with low-to-no money down. The only thing holding me back right now is the money part, and I REALLY want to take action this year. Thank you for any responses to this post, it is greatly appreciated!

Nitzan Mosery · Answer

Hey Thomas, congrats on educating yourself. Thats a huge first step.When it comes to money raising we always here "if the deal is good enough the money will come.."we are never taught the second part of that phrase.. "only if you've done the hardest thing, build relationships.."while you are building your name and reputation, start figuring out who your perfect investor is. Create that specific avatar. age, height, eye color, hobbies, work, children, married, goals, fears... once you know this, you can then network where they hangout and build relationships with these people so when you have a great opportunity you can present it to them and let them decide if they trust you and like you enough to give you their money...i buy multyfamily around the country using OPM. i raise capital for everything. the down payment, the inspection reports, lender fees and equity.. i dont use my own money. that's the beauty of real estate.. start asking yourself, what funds do i need and who can help me get it..? then start networking in person or via social media.. now that you know who your avatar is, you can create social media posts that will attract these people to you.. and you build relationships that way. start building your team. ask who do i need to have on my team to be successful with what i want to do. then go out and find themjoin fb/linkedin groups and start posting in there. start adding value to the group before you put out your ask.. or you can post "newbie here looking to build my team. im looking for someone who can...good luck happy hunting and let me know if i can be of assistance. we all started at the beginning..

Nicholas L. · Answer

@Thomas O'Donnell I think the best possible position you can get into is to have savings. Be patient and spend the next year saving up as a much as you can. If you're living with your parents and not paying rent, this is a great time to minimize your expenses and save up as much as you can. Doing this, instead of rushing, will put you in a much stronger position. There are going to be deals in 2023, 2024 etc.

Thomas O'Donnell · Answer

@Scott Mac Thank you so much! I will definitely reach out to some lenders and ask questions and figure out the requirements. Yeah one thing I was worried about was them running my credit but I do know my credit score thankfully so I will tell them. You have been very helpful and I appreciate this!! Definitely using this for reference

Thomas O'Donnell · Answer

@Scott Mac Thank you for your response! It definitely does look like I will need to find more ways to raise capital, such as a 2nd job or building relationships with those who already have the capital. Unfortunately, because of where I live, getting an FHA loan and house-hacking is not an option because these properties are all well over $1mil (South Bay Area). Also, I am currently between jobs as I just recently moved back to my parents. Because of this, I am unsure whether meeting with a lender at this time is the best step for me, seeing that I technically do not have a strong track record with a current employer.

Scott Mac · Answer

Hi Thomas, What Nitzan said above holds water. But if you are wanting to go it alone, go to a lender and get pre-qualified. (don't pay for it yet--just ask the requirements--and write them down) Also ask how much they will lend you. That will frame the dollar size purchase you can do. If it's a 2 to 4 FHA and you will live in a unit they might want for instance 3.5% down and X in the bank as working capital/fix up/closing, etc... If it's a 20% down investor loan they may want a certain net worth, as well as a certain cash position in addition to the down payment. When doing it yourself alone, your lender is your dictatorial partner telling you what you can and cannot do and telling you what you have to do to partner up with them as lender on the deal. Step 1 is to get pre-qualified and have them tell you "What you need to be/do" to get the loan, then go do that. Step zero is to get the knowledge you need to not lose the investment once you get it. Will you self manage, will you self-labor the fixups, do you know these things or will you have to learn these things. Co-step zero might be work a 2nd job and save up 100% of that money, because $5,000 even at 3.5% down is only about $150,000 structure, can you find a $150,000 duplex, tri or quad (???) at $75k, $50k. $37k a door where you can also live there--and that is not so run down the lender will balk at lending on (???) That should take some of the mystery out of it for you. Good Luck!

Leo Turkes · Answer

how can I get real estate with other people's money? for example, where could I start?

Jo Brown · Answer

i dnt know what exists locally but i know in various countries they call it joint ventures when people team together to buy property legally with a solicitor to buy or invest together one might have money but not time the other has time but no money. or i have seen in usa coops that i dnt quite understand b ut its seems a few people can buy a place with separate units together and not quite own a certai part but be part of the coop and there are ways with some properties to sell one unit . i saw a property divided into 3 units that was a coop.there is also something known in some countries as vendor financeand people do this to earn money.some famous property investors did this to earn more money to get into investing.but it helps people like you aswell it can help everynei'm unsure of the details b ut it pairs up sellers and buyersand buyers who can pay but cant get funding so easily for whatever reasonand it organises the funding in a way that the vendor earns money the person linking them up and organising it makes moneyand the buyer benefits also with getting a good loan and getting into property. if you cant pay its still like a bank that you can lose the property.everyone wins i dont know what house hacking is maybe somene will explain or i'll google it not all counties allow different parts of a home to be rented out separately so i'm unsure what type of multies exist in different counties or whats allowed or not allowed in different areas.i gather that something has to be zoned as a multi perhaps, so not everyone with a separate room or basement can rent it out legally.

Scott Mac · Answer

This is not rocket science, it's more boots on the ground stuff. Don't meet with lenders (at this stage), let your fingers do the walking and dial them on the cell phone--and don't fill any thing out...just ask questions. Call A LOT of lenders and talk to them like this. Use an excel spreadsheet to keep notes side by side on each, so you can compare differences. It can become your Swiss army knife if you talk to a lot of them. or you could spend countless hours/days/weeks/years researching it on the web---but the call method is better. You: Hello Mr. Lender, I'm interested in buying a 4 plex and living in one of the units....do you have loans for that? Lender: will go into sales made and ask your personal info such as name address, etc... for their future sales callbacks..(don't let them do a credit pull)..but know your Credit score and tell them that. Ask about the FHA loans and regular investor loans...ask their requirements for lending to you--record this in your spreadsheet. All of this should be free...because understand if you begin to move forward on the loan it will cost you...don't move forward yet...just get the info you need...an Info Call only....no credit pull, nothing that costs. Call several lenders...and see how they differ....if at all. Call some loan brokers too and get their requirements... You can't buy it without the lender, so you need this info to know what to do. This will arm you with the knowledge you need if you decide to partner up too. https://www.youtube.com/watch?v=SYpJ1IgGoc0 Good Luck!

Thomas O'Donnell · Answer

Thank you so much! Yes it would definitely be great to build a team and begin buying with OPM, that is most likely what I will be doing. I will be sure to join groups on facebook and start to connect with others who may be in the same boat as me, or are willing to help with some guidance.

Thomas O'Donnell · Answer

In addition to this, is there any strategies I could be pursuing to build capital faster?