Investing With Low Money Down

[Ben Morand]

Hey guys! My name is Ben Morand and I’m a 20 year old college student at the University of Florida. Over the past several months I have taken all the action I feel I could’ve taken in terms of growing my real estate knowledge base. I took my real estate agent pre-licensing course (and am planning on taking the exam mid-August after my summer classes), read countless BP books by Brandon Turner, J Scott, David Greene, etc., listened to HOURS of the BP podcast, posted nearly 100 times on the forums, and connected with several people in the industry, chatting through the forums and over phone.

Since I started my journey, my biggest motivator has been to just go for it: educate myself, take action now, and figure it out as I go. For the first time, I finally feel ready to jump into my first deal and get my portfolio moving. I would like to use the BRRRR strategy to acquire a SFR with virtually no money out of my own pocket. My criteria goes as follows:

- SFR

- minimum 3+ beds

- minimum 1+ baths

- No pool

- A or B class neighborhood

- Orlando Market

- Purchase price: max $250,000

- Price + rehab: max 70% of ARV

- Moderate rehab: avoid any with extreme fixes

- (post-refi 25% kept in equity): 15% minimum CoC return from that "down payment"

In terms of my current situation, I have a 751 credit score and about $4,000 in cash reserves. As a college student, I have no source of steady income yet, but my parents have agreed to co-sign until I can refi them out later down the line (to help me get started now).

My questions are:

1) I know it won't be an easy task finding one to match such terms, but is it possible that I will be able to obtain a HML to cover my costs, seeing that I have no prior experience and very little money to fund a down payment/points without sucking up my cash reserves? I am fine with using my cash reserves for the project, but I will need them to pay off the HML interest payments until I can have it rent ready and tenants paying each month.

2) With this in mind, do you think I'd be able to hop into my first deal soon? I have started my search primarily in bank-owned REO's, but I also plan to post ads on Craigslist and FB marketplace. I have been studying and learning all I can over the past few months, and I finally feel ready to push forward and escape any threat of analysis paralysis.

Thanks everyone for the help! I am open to any and all advice, and also would love to connect if anyone would be interested in chatting further!

[Brett McManus]

Hey Ben, 

Appreciate the enthusiasm as you are in a very similar situation that I was just a few months back. I too was ready for my first deal with inspiration to BRRRR from posts on these forums as well as BP Podcasts. The reality was that as I began taking action I realized a few things:

1) BRRRR has some risks associated to it that can be easily overlooked by new investors (calculating ARV, managing rehabs, etc.)

2) Hard money is freakin expensive (not the low money down I needed)

3) Lack of experience makes it very difficult for HML's, Contractors, and Property suppliers (wholesalers) to take you seriously.

Instead of this I took the advice that many offer to beginners on these forums and hunt down a Duplex to house hack. In doing this I was able to purchase a great starter property within 3 months of this mindset change by doing the following:

1) Connecting with a local agent/investor who was able to set me up with an MLS search that could fuel properties to be analyze with BP calculators.

2) Working with local mortgage brokers to understand FHA owner occupant loans which combined with a state funded new-buyer assistance program (and negotiated seller paid closing costs) allowed me to close with only $2,000 out of pocket.

3) Ultimately close on a base-hit property with virtually no money out of pocket, source my first tenants, do some basic cosmetic work to boost rents, and gain a TON of relatively low risk knowledge that will better set my up for future BRRRR investing.

Although BRRRR is an amazing strategy, I highly recommend exploring house hacking in order to hit the ground running and get some experience under your belt.