My first rental property

[Adonte Lipsconb]

Hello BP I need help I want to purchase a rental property. I need 20% to put down and the seller is willing to do owner financing for 5yrs at 7.5%. The property is $250.000. These are the questions that I have. 1. Do I start a LLC first. 2. Which is better hard money or private money for the cash to put down the 20%. If neither what is the best creative way to get in to the deal. 3. Do I use a small bank to refinance the property to a 30yr fixed. 4. Do I need a realtor. I think that this property would be great for my first buy and hold. Also within the next 8 months I will be moving to the city that this property is located. Thank you

[William Haltom]

Hey Adonte,

Base on you question and your description of your situation, I would say move slowly! Let me explain.

Q: I need 20% to put down and the seller is willing to do owner financing for 5yrs at 7.5%. The property is $250.000.

A: If you need to borrow the down payment and the seller carries back the balance, you have no skin in the game. It will be very hard to find an investor that wants the loan. 100% LTV

Q: Do I start a LLC first

A: Yes, If you plan to be in business you will need to create an L.L.C. (less than $100).

Q: Which is better hard money or private money for the cash to put down the 20%. If neither what is the best creative way to get in to the deal

A: Most of the Hard Money is private money. Any loan and the interest rate charged is based on RISK, the lower the risk the easier it is to get the loan and the rate is much lower as well. High risk, high rates, hard loan to get! 

 a: The best way for you to get this deal done based on the limited information given would be for you to find a partner that already has the down payment you need. You bring him/her the deal, and they put up the down.

Q: Do I use a small bank to refinance the property to a 30yr fixed

A: A new loan is what you will need to be prepared for in year 4. 

Q: Do I need a realtor

A: No, in fact if you get a Realtor involved someone will need to pay that commission and the Seller will need a bigger down payment to pay the Realtor. I would put my deal together with the Seller and then go to a local Title and ask them to help walk you through the process.

Comment: I think that this property would be great for my first buy and hold. Also within the next 8 months I will be moving to the city that this property is located

Response: It is hard to be an absentee owner right out of the gate. If you have a bad tenant that beats the place up because your not in town, it can be very costly to do repair long distance.

Good Luck!