First investment deal

[Reh N.]

Hi BP community!

I need some input on an investment property.

Is it better to factor in my construction costs into the Hard Money OR use the cash I’ve set aside towards construction? I’m a contractor so the construction will be at cost.

Pros: 1) down payment would be much less because I would not factor in construction costs Into the HML.

2) my interest only payments would be lower.

3) have money in reserve. in case things go south.

Cons: 1) payments would be higher.

2) very little reserve cash.

FYI: this would be my first deal.

[Corby Goade]

If this is your first deal, I'd keep as much of my own cash handy for the exact reasons you list above. Once you get the hang of things and knock a few deals out, you'll have your numbers and timeline tightened up and have a better feel for where you should take a calculated risk and where you should not. You might be to the point where you can get yourself better HML or PML terms, maybe even an equity partner.

Best of luck!