Buy & Hold Rental Financing Calculations

[Joe Garretson]

Howdy, I'm making my way through every BP Podcast right now educating myself as much as possible before I make my first purchase. Earlier this week I happened to listen to episode 247 which was Brandon's 90 day challenge to buy your first or next podcast. You can say I'm energized to take action after listening to that. 

Onto my financing questions. I've got a mountain of equity in my house. Like $300,000 probably. I'm going to do my best to get my wife onboard (she's risk averse) with tapping into about $40,000 to buy a small multifamily in the low $200k range. We've got about $15,000 in cash ready to deploy as well.

To make sense of the cash flow (reason I'm investing) and all the financials, we'd use the equity and our cash as a down and then secure a mortgage for the remaining 75-80%. I'm just going to add the cost of our equity loan into my mortgage payment, the other costs and that's my expenses, correct? 

If I were to secure a partner instead of using the equity, is it the same process? Pay them 7-8% or something like that over 5-10 years and then I'd keep all proceeds from property with the goal to drive up value and refi to pay the partner back as soon as possible? Or instead of paying the partner back their principal, can you split the after expense proceeds 50/50 or whatever percentage breakdown that would get the deal done? That would seem to keep the loan costs to a minimum and maximize the cash flow. 

I'm trying to focus on these two paths because I think once I have my grasp on the funding side, finding a deal will almost be the easy part.

[Joe Villeneuve]

They both can work, but as far as the partner splits, you need to learn how to assign the split %%% based on the responsibilities of each partner...not just a 50/50.  Don't let the funding partner say they need 50% just because...