First investment property, seeking advice and open to learn

[Diane Jacob]

Hello BP Community,

My name is Diane, and I'm just starting my journey as a real estate investor. I currently live in the Midwest and, due to circumstances, house hacking is not an option for me. I'm working on building my down payment including repairs fund and have a good credit score above 750.

I’m interested in buying a property near Kansas City, in markets like Topeka or Springfield, IL, but I’m open to other cities in the Midwest. I’ve noticed that most local lenders offer loans starting at $75K and above. I’m seeking advice on how to fund properties typically priced at $66K or below, as well as properties around $100K or under.

I've been looking into the BRRR method and Section 8 as potential strategies. Right now, my main challenges are finding funding options as a starting investor and analyzing deals effectively.

Any advice on starting out, funding options, and thoughts on different markets would be greatly appreciated! I’m eager to learn from this community and hear your experiences.

Thank you!

Best,
Diane

[Dustin Tucker]

@Diane Jacob

Congratulations on your journey.

1. I would suggest finding an experienced investor and doing one to three projects with them so that you learn and come out profitable.

2. As a lender our minimum loan size is $50,000, but as a loan design for repairing properties the minimum loan size does not have to be met at purchase. Here is an example of a recent project I was able to fund.

Purchase Price- $35,000

Rehab- $30,000

Arv $100,000

We funded $25,000 @ purchase and $30,000 for repairs for a total loan size of $55,000.

If you're living in the midwest I think that there are great opportunities to purchase 2 to 4 unit properties and rent them out I would stay out of Illinois the tenant laws are not favorable to you as a landlord.

[Sean MacDonald]

Hey Diane, 

Since you're targeting properties under $75K, consider local credit unions or community banks, as they may offer more flexible loan options for smaller amounts. Portfolio lenders or private financing (HARD MONEY) also works well for the BRRR strategy, but does require more liquid cash. For markets, Topeka and Springfield, IL, are solid choices with potential for cash flow, particularly if you're considering Section 8. I have seen investors see major success in the Section 8 markets. Be sure to refine your deal analysis by focusing on cash flow, the 1% rule, and cap rates to ensure solid investment returns!

Good Luck!

[Milton Chamberlain]

I have closed transactions with Jackie Ahumada at prosperity mortgage at with a minimum of $50k financed portion...this was around 1-2 years ago. property was $80k. You might google her and contact her to inquire more

[Diane Jacob]

@Dustin Tucker 

Thank you! I really appreciate the advice you provided. I’ll definitely be taking tenant laws into consideration. I was also looking at properties in Springfield, MO as well. Yes, you are right, the Midwest has great opportunities. Thanks for clarifying the details about the minimum loan size. I would love to connect in the near future.

[Diane Jacob]

Thank you, @Sean MacDonald I appreciate the feedback. I will look into community banks and credit unions. Are there any that you recommend?

[Diane Jacob]

Thanks @Milton Chamberlain Definitely will reach out to her and see what she say. 

[Anderson S.]

Hi Diane,

It's great to hear that you're starting your real estate investment journey and already considering key strategies like the BRRR method and/or Section 8! Both can be powerful tools for investors, especially when you're looking to maximize cash flow and returns.

Since most lenders have a minimum loan requirement of $75K, you might want to explore hard money lenders.

These lenders specialize in funding investment properties, even for amounts below traditional lending thresholds. Hard money loans are often short-term and ideal if you're planning to use the BRRR method, where you refinance after rehabbing the property.

Reach out if you have any questions.

[Malcomb Stapel]

@Diane Jacob I have been in the Topeka area for 40 years and invest exclusively here. Feel free to DM me if you want to chat. 

[Connor Hibbs]

Hi Diane,

If you're looking at properties with purchase price values under that 75k mark then your best bet is to start with a light rehab loan scenario. With rehabs you can get to significantly lower purchase prices and typically the lender will just be looking for a100k+ ARV so that you can refinance out of the loan once rehab is completed (100k as-is value is pretty standard for DSCR loans).

With rehabs experience is the biggest factor to LTV and rate so partnering up with someone for the first one or first 3 will get you significantly better terms (working in the same area can also provide benefits in terms of LTV). Then once your projects are completed then you can either sell or refinance and hold the property based on what works best for your strategy.

[Diane Jacob]

Hi @Anderson S. Thank you. I will consider the hard money lenders as well. I will reach out if I have questions in the near future.

[Diane Jacob]

@Malcomb Stapel Ok, will do.

[Diane Jacob]

@Connor Hibbs Thanks for the feedback. What are qualification requirements for a DSCR loan?

[Malcomb Stapel]

Quote from @Diane Jacob:

@Connor Hibbs Thanks for the feedback. What are qualification requirements for a DSCR loan?

 The asset has to qualify, it is typically not based on your personal qualifications. The main qualification is the debt service ratio and what the lender considers the minimum they will accept. 

[Min Zhang]

Hey Diane, I'd be happy to send over a list of trusted contacts I've used for financing BRRRR properties to help you get started. Let me know how else I can assist!

[Diane Jacob]

@Min Zhang Thank you. That will be great.

[Adam Redepenning]

Hey @Diane Jacob I'm going to send you a message!