Austin, TX · Member since 2015 · 4 posts · 2 votes
I've been reading for a while and am fascinated at how some people have the cash on hand to buy:
-Properties out right with cash
-Multiple properties with 20% down payment
Yes I understand there's many ways to finance but these seem to be the most common for starter investors.
Yes I also understand its sort of like a self perpetuating process that builds on itself but that takes so much time and I see so many young people in the game.
My question is how did you pay for your first few properties and what do you do for a living to support that? Did you get help from family or saved up?
Both my and my wife are doctors with little expenditurrs and even for us it takes a good while to save for a down payment.
Rental Property Investor · Cincinnati, OH · Member since 2015 · 52 posts · 19 votes
11y
Hi Alex,
The way I started was by utilizing an "first time buyer" FHA loan (very little down, I believe 10k on a 170k home) to purchase a (2) family house. It wasn't the prettiest and 1 unit was in better condition than the other. I immediately found a tenant for the nicer unit while I lived in and worked on the other unit. His monthly rent check almost completely paid for my monthly mortgage, insurance, and property taxes. This free'd up the money I typically paid for housing to save for my next investment property. I believe the BP creators refer to this as "house hacking".
I never asked family for money (that can get hairy). I simply found ways to cut costs, short term discomfort. It's now a mind set, I'm able to save almost 40% of what I make a year now.
I hope this helps Alex. I've heard Austin is an exciting market. Best of luck!
Still trying to figure that one out. Just missed at 26k deal worth 80k with 5k rehab. Can't find anyone who is not afraid of real estate and in a position to loan me 25 grand. I even offered 10k in interest. I could be a millionaire right now if I could have taken advantage of all the deals I saw over the last five years but could not afford
JV with the Seller
Wholesaling is like ripping off the seller.
.7 x 80K - $5K - $5K wholesaling fee = $46K net to seller (maybe)
1. Buy w 1st note and mortgage, no payments for 4 months, called a moratorium
2. Fix w $5K private money
3. Resell with great realtor
You Net $10K,
Seller gets $57K
No banks, you can have the worst credit, BK even.
I like this strategy and plan to use it in the right situation. I have one question/concern however. We can guesstimate ARV all day long but that isn't a guarantee. The way this is setup, if ARV is overestimated by a small amount or the market starts to drop, the investor's profit is going to get squeezed, disappear, or end up in a loss, during the rehab/sale time period. With such a small "profit" margin for the investor, this could easily be lost or squeezed.
What do you think about structuring the deal so the homeowner is going to take those losses? In this situation, the investor is helping the owner sell a house that isn't in sell-able condition and putting in all the work and funds to rehab the place only to possibly end up with nothing.
I'm not sure exactly how to legally structure it, but why not agree with the home seller that the end price to them will be the SOLD PRICE - Your Net (agreed upon at signing) - Costs = Money in their pocket.
There is upside to this setup for them also, you could end up with a higher sold price then expected ARV.
Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes
11y
What you are referring to is an "equity split"
In the sandwich lease purchase business, say you lease with option at $200K (you and seller) and sublease and suboption (you and tenant buyer) for $220K or new appraisal, whichever is higher.
You tell the seller your plans, but offer an equity split in the net profit over $220K.
In the sandwich lease purchase business, say you lease with option at $200K (you and seller) and sublease and suboption (you and tenant buyer) for $220K or new appraisal, whichever is higher.
You tell the seller your plans, but offer an equity split in the net profit over $220K.