Looking for creating financing options

[Christian Penny]

Hello! I'm am looking to get into real estate investment and purchasing a first property some time this year. However, I'm concerned about the 20 to 25% down payment required for most loans. I'm in Madisonville, LA which is north of New Orleans and with the research I've done so far, I'm thinking that in order to find a property in this area that can produce a decent cash flow I'd need to invest around $100k in a property, minimum. Therefore, I'd be looking at $20k down payment for most conventional loans which is more than I'm willing to come out of pocket (I'm also considering things like maintenance reserve cash and rehab cash that would increase my out of pocket costs). I thought that perhaps getting a home equity loan or refinancing my home would generate cash for a down payment but those options are no good because I've only been in my home for 6 months and don't have enough equity in it yet (banks I've talked to require minimum 85% LTV). Refinancing is not wise right now with high interest rates. So, I'm struggling to know what other options there are for financing that would require less out of pocket cash. Would appreciate any advice.

[Shiela R.]

@Christian Penny hi there :)  So, creative financing is a big umbrella for various ways to make the terms on which you acquire a property have you put very little money down.  It's a whole strategy where you need to be targeting sellers who can't sell retail (or don't want to sell, depending on your strategy) for whatever reason.  You need a plan and scripts. I started doing this after finding a mentor who showed me how.  So it is very possible. I had very little experience. It's not for the faint at heart.  And it is harder when it's a seller's market. However, I did close to 30 deals before I turned 30.  All with little to no money down.

I'd be careful of banking on the BRRRR method as it assumes the value holds and improvements raise the value. However, with rates rising and most markets slowing, it is a risk that your re-fi will still have the numbers work. If rates continue to rise and values drop even 10% you might be in trouble.

The most important thing to understand when investing, is investors don't pay retail.  They buy at a discount.  This will give you a little insurance for ever changing market conditions.