Buying a rental, looking for downpayment financing ideas

[Rob Couch]

Hi all, 

Still relatively new on the forum but have listed to a bunch of the podcasts  We (my wife and I) sold our first flip last month and now looking at a buy and hold property. 

The house we are looking at is in good condition and a great location, close to the University of Notre Dame so lots of rental options like student/visiting professor/short term for sporting events, etc. Typically we would be looking for a BRRRR type house but the prime location is very appealing. We are looking at doing an off market deal with the current homeowner, we should be able to pick it up for around $200k. My question is about downpayment, we have the cash to do 20% but would rather save that for buying flips for cash. We are opening a HELOC for flips also, so we would have quick access to that money if we needed it for a flip, if we had to put our cash in as the down payment. I'm just typing to figure out a way to not have to be out of pocket with so much of my own money. I don't think the seller would want to do a seller financing option, they want to be done with this property and will need to qualify for a mortgage on their next house. If I brought in private money I would probably be paying a higher interest rate than my HELOC. I could bring in an equity partner but then I dilute my cash flow. Am I missing something, or do I just need to bite the bullet if I want this deal?

[Grant Rothenburger]

@Rob Couch Welcome to BP!

It sounds like you should at least ask about seller financing. Assuming that's a hard NO, I'd either just spend the cash, bring in a partner and give up some equity/cashflow, or don't get the property. 

One thing that happens to some real estate investors is they have some cash for their first buy and hold, spend it, and now have no cash for more deals. I'm of the opinion that you should either work on finding non-traditional funding sources, or flip house until you have a lot of cash to play with. It sucks when you see people on here talking about being stuck with one property because they have to save a couple more years to get another one.

So maybe look ahead, do you want to keep buying rentals? If so, after purchasing this one, will you be able to purchase another? And after that? I'd work backwards from your goal, you should be able to develop a strategy that way, or ask here for ideas once you know what the goal is.

That's just my opinion, good luck to you!