23yo First Time Real Estate Investor

[Destiny Hodges]

Hi I'm 23 and I have $50k saved up. I currently live in Houston, Texas and I will be closing on my first duplex in December. I want to purchase more properties next year and I plan on switching to a higher paid job plus I will be cutting my expenses by renting out the other side and having a roommate (I have a FHA loan). Even though I plan on saving more money what would be my best option to purchase more properties since I can't use the 3.5% down for another year. Also next year my goal is to purchase another 2-3 properties by the end of the year and the properties don't have to be located in Texas.

[Monica Vigil]

@Destiny Hodges, Congrats on your duplex! What a great way to get started. 

The two best sources of money outside of conventional financing are private lenders and hard money lenders. I rely on private lenders to finance my flips but you can also use a private lender to finance a rental property too. 

A private lender is an everyday person you know (friends, neighbors, relatives) who is dissatisfied with the measly interest their investment funds are making sitting in the bank in a savings account or CD. There are millions of dollars all around you. In exchange for giving them a high rate of return (8%-10%), they give you a mortgage and let you use their funds to buy the property, renovate (if needed) and rent it out. They are protected with the mortgage and you get to expand your assets. This requires you to buy a house for a good price and not overpay. You can put some money into the deal with the savings you have set aside to help increase equity. Once you have the property ready and rented you can then refinance the private lender out. There's no limit to how many private lenders you can have. I have one private lender I've used on so many houses and she started out loaning me about $62,000. Over time the amount she loaned me went up and today she trusts me with over a million dollars.

A hard money loan is also possible, but the terms are a bit more aggressive and it will cost you more. It may not work for your scenario but you can always run the numbers. A hard money lender is not going to be as amenable as your average private lender. They will want points (2%-5%) in addition to their interest (10%-15%). Unlike a traditional bank loan, a hard money lender usually loans you money based on the quality of the deal, your experience, and not your credit score.

Best of luck! I also highly recommend watching Lili Invests on YouTube. She's newer to real estate and is documenting her journey as she amasses her rental portfolio and gains experience.