Private Lender, Bank, Lawyer, Accountant: Where to Start?

Question

I just purchased my first home last year. This was not an investment property, just a place for me to rest my head. I had a goal to buy an investment property by the end of the year (or next year due to, well, you know). I am using my free time stuck at home to network and learn as much as possible, but I haven't actually reached out to anyone specific except people I know personally who have investment properties. I have a friend living in Florida who mentioned investing in Philadelphia who has a substantial amount of cash. I didn't immediately say "Hey give me money so I can flip houses," but I did have a short conversation about my plans.

I am now wondering where I should start if I decide to pull the trigger. I am leaning toward the BRRRR method. Should I show the friend my plan? Should I talk to a bank to see if they will even lend to me? Should I seek legal advice before anything? Should I have a potential deal already on my radar?

I'm sure there are answers somewhere on here, but my situation is a little weird. I own my home, but I am not working and haven't been for over 6 months. I am currently finishing my bachelor's, but I have worked in the restaurant industry for the past several years. I am a veteran as well so I have been using my benefits to help financially and a cook job would always pay enough to afford my mortgage, but that might be hard to find in a time like this. Any thoughts?

Adam Bartomeo · Answer

I would suggest starting by finding a mentor. Find a local investor or reach out to folks on BP. The 2 places that most people start 1. find the deal, 2. find the financing. Either way you will have to do both. It you are a w2 and are looking to buy a SFH for a buy and hold then financing should be fairly easy. Almost any lender will lend on this type of property. If you find the deal first then financing will become easier. You can often find investors who are willing to partner on good deals.

Lucas Miles · Answer

@Dylan Bruner good to hear your starting out the correctly and spending a lot of time learning before diving into real estate. Real estate (flipping houses especially) has inherit risks, educating yourself through BP, books, podcasts, etc is a great way to start. Build your foundation of knowledge and then get started. At some point you will have to take action to get started!

Great way to get started is to meet local investors and talk to them about their investing, and learn from them. Take them out for lunch, investors love talking about their investments! Learn from them and understand the local market from the experts. Learn how to analyze deals and finding good deals is key.

I would reach out to a smaller local bank (probably several actually), and verify that you can get approved for a loan. If not, ask for their criteria and figure out how to meet that criteria. Generally banks will want to see consistent income from the past couple years, along with certain debt to income ratios. I've had better luck talking to commercial lenders rather than residential lenders at a given bank (even for SFR).

I would not generally not recommend using someone else's money for your first deal (especially friends/family), and banks probably won't either. You don't want to ruin a friendship or start with a bad reputation by screwing someone out of money if you aren't successful on your first deal. Save up some money, figure out what investment strategy you would like to pursue, educate and learn that strategy, find a great deal and take action!

Dylan Bruner · Answer

@Lucas Miles thank you for the quick response. I was thinking of first finding a bank to work with around here and it seems your suggestion reinforces that. I should have mentioned that I have a good six month cushion sitting aside, as well as some money in stocks that could easily be liquidated if needed and I'm saving more every month. My credit is excellent and I have a perfect track record of paying bills on time (I am in my 30's). My idea was to use somebody else's money to purchase, then either flip after rehab if the price is right, or rent it out to build experience as a landlord.

I am currently analyzing deals daily just like doing homework for the big test. This is all in the research phase at the moment and I am waiting to see if the country settles back down before making any moves. I have already set up meetings with two local investors (landlord across the street from me and an old boss with multiple properties), so I am taking the advise of people who have been in my shoes. BP podcast, UBG, books and YouTube videos are very beneficial and I love learning, but one of these days I will have to make a decision.

Lastly, I should probably wait until I have a job, even if it's part-time. When I got my mortgage the bank wanted to see two years in the same industry, not necessarily two consecutive years. Because I am in school my work history is spotty. It's also worth mentioning I got a VA backed loan and had the seller pay all closing costs, so my initial investment in this property was zero.

Thanks again for welcoming me to the community and I look forward to further discussions!

Private Lender, Bank, Lawyer, Accountant: Where to Start?

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