Starting off with no-money / going into first deal with nothing down.

[Samuel Olivas]

This is my first post on biggerpockets.com & I would like start by saying how useful all the free resources and information has been on here. I currently live & am looking to invest in Michigan. Ive always wanted to invest in real estate but I struggled to take the leap because I didn't have the amount of capital that I hear many people say they need. So for the last 2 years, I have let this idea stay just that, an idea. This year, I decided I'm going to do whatever it takes to own my first investment property by the end of the year. I said to myself "im gonna get into my first duplex...and im gonna do it with as little money as possible". This seems like an impossible task in today market but I decided to do my research on creative financing anyways. I knew that in Michigan (and im sure across many states as well), you can purchase your first home with only 3% down on a conventional loan, or 3.5% down with a FHA loan. I knew that I could probably cover these cost on a sub 185k home, but that still left closing cost and other unknown expenses to come. So I did some more digging. Turns out, there is a a loan called the MISHDA Loan in Michigan. This loan "grants you" 10k towards down payments & closing cost. This means if I purchase a home at the right price, I came come into this deal with little to no money down to start off. Now it is a loan so this means you will have to pay it back when the loan is payed off or when you sell the property, but regardless it could my ticket into owning my first rental property. I should also say my main interest is purchase a duplex & house hack.

Now that my backstory is out of the way..

What are pros & cons to using this "creative" method to finance the property?

What are some things I need to look out for with a loan like this? 

When renting a duplex, what have been some of the best way you have found tenants & what is your process to screen them? 

Does anyone have experience using a side of their duplex as a STR & if so, what did you learn?

Thanks again for everyone that took the time to read this & answer my questions!

[Jaron Walling]

@Samuel Olivas From personal experience you can't have your cake and eat it too. 

"What are pros & cons to using this "creative" method to finance the property?" - Risk. What about leaking roofs or accidents you can't predict? What about tenants that stop paying rent 3 months into a lease? Unless you find a great deal you'll have very little, zero, or even negative equity from day 1. I advise against using a $0 down loan. Without any skin in the game the downside far out weighs upside. Smart investors never put them self's into a position like that. There are exit strategies (long and short) baked into every property. With nothing down, no value add, or no strategy you can't exit quickly if something bad happens. 

"What are some things I need to look out for with a loan like this?" - In my opinion I would avoid this loan. REI requires $$$ and it's stated over and over again for a reason. No skin (money, time, skills) in the game can lead to a disaster; lose property, cost you money, start over.

"When renting a duplex, what have been some of the best way you have found tenants & what is your process to screen them?" - Focus on the market research, numbers, and location. If you buy property in a nicer location quality tenants will find you! Avoid the war zones. Read and learn about screening tenants before you ever make an online listing > the rest is LEARNED FROM EXPERIENCE. 

"Does anyone have experience using a side of their duplex as a STR & if so, what did you learn?" - You're running a small business. It's much more hands on depending on demand. Know the market and determine if it's saturated or an opportunity. You're buying nice furniture, chasing 5-star reviews, and probably handling all the PM. It's completely different than a LTR.