Starting out with little capital.

[Steven Scheer]

Hi all!

New to the BP site and excited to network with like-minded individuals about investing in real estate.

A little about myself: born, raised and have lived my entire life in Wisconsin. Married with no human children but with two cats. Currently working in Information Systems at a prominent life insurance company but will need to become my own boss. Why? I'm just built that way.

On to my topic. I am reading "The Book on Investing in Real Estate with No (and low) Money Down". Excellent read, so far.

I was wondering if anybody has any experience with the scenario described on page 83 where the author describes a situation where a hard money loan was obtained, then refinanced.

I have very little capital and zero experience in investing and was wondering if I were to obtain a hard money loan, how long do I have to wait to refinance. For a LTV mortgage, do I need to have a down payment? Does anybody else have a success story for this type of scenario?

Any help you could provide is greatly appreciated!

[Darren Budahn]

Hi @Steven Scheer

Welcome to BP! I am a Milwaukee investor as well.  There are quite a few investors from Milwaukee on the site.

In regards to your question, while I have no experience using hard money, I'm fairly certain you can refinance into a conventional loan whenever you want to repay the hard money lender (assuming there are no prepayment penalties). The biggest concern will be that you will need to buy at a large enough of a discount in order to be able to refinance. Most conventional lenders are not going to lend at more than 75% or 80% LTV. Therefore, when the hard money loan is due, you will have a big problem if you don't have enough equity or if you cannot come up with enough cash. Most hard money loans are short term--a few months to maybe up to 12 months for a ballpark average. You can read some threads on BP on how people successfully use the strategy that you are considering.

Also, just make sure you know what you are getting into if you start investing in the lower income areas of Milwaukee.  You will need to be very hands on and will have to do a great job of screening tenants among other things.