Cash vs. Loans - How to get started without ton of spendable cash?

[Lance Korsun]

I'm new to the BP community, have introduced myself to a few local Jacksonville folks and I've been listening to the podcasts, reading the forum, etc, etc. One question I am still not 100% solid on is around Cash vs. Loan on your first go at investing.

For me, I'm trying to look at this as more of a serious hobby -- that if all works out -- could be my normal gig one day. I also want to start small (if possible) so that I get complete buy in from my wife and my 10 month old (yes, she has opinions too).

For the last few months I've been looking on Auction.com, homesearch.com (one other site I can't think of at the moment) for auction properties. Most if not all have been Cash Only offers. 

I'm a newbie, so I'm curious how do newbies get started without 50 - 75k laying around? Is it just patience for a property that offers financing?

Any insight would be great -- just trying to learn new things every day.

Thanks!

[Chris Kennedy]

You can work with a realtor to find listed properties in reasonable condition within your price range. Auction properties, foreclosures, etc are usually in bad shape and frequently will not qualify for financing. Even if they do you'll be competing with cash investors.

Get pre-qualified with a bank or mortgage broker. Figure out 2 or 3 neighborhoods where you would be comfortable buying, look for houses in structurally good shape but perhaps a little outdated, and start making offers.

Some tips for getting a financed offer accepted:

1. Make sure you have a letter from your bank/mortgage broker showing you are capable of getting the loan required.

2. Keep your inspection period as short as possible (7 days is usually good)

3. Look for properties that have been on the market a while (90 or more days). Although many of these maybe overpriced, the sellers may be frustrated and ready to be more realistic. Many of the competing buyers have already lost interest or just passed over the listing.

4. Find a way to build rapport with the seller or listing agent so they trust you and want to work with you. This can be as simple as submitting a letter with your offer, or asking your own realtor to set up a meeting with them. Look for a way to solve the seller's problem and you'll make a deal.

5. Find the house before anyone else - call for sale by owners, send direct mail, attend garage sales and ask if the owner is thinking of selling...get the deal before the competition!

Good luck!