Financing my first rental units

[Michael Pettit]

Hello BP,

I'm just getting started. I've got all sorts of BP vids lined up to enhance my knowledge on how to get the financing for continually adding new units, and may get everything I need there, but wanted to also ask for the methods you used to get started.

Right now I have 0 units. My initial thoughts were to take a cash out refi on my house and acquire $200k for my first units. This will increase my mortgage, and the cash flow from the units will need to make up for it.

But even if I do that, I will end up at a point where I'm back to not having enough for a down payment on the next unit. So perhaps I should initially find the best, smartest way to acquire units without having down payment money in my bank account.

What did you do to acquire that next unit when you didn't have the down payment readily available? Also, is doing the cash out refi on my house a bad idea to get started?

I'm sure BP already has a treasure trove of information on this topic, and I will find it. But if you can spare some time, I would also love to hear from you here.

Thank you!

[Cassi Justiz]

I would give a little caution on increasing your living expenses to buy rentals. It's a great idea in theory, but it also puts you in a limited equity position on your primary residence should you decide to sell or move in the future. Also, with the increased living expense of your primary, you'd need more rentals just to sustain the cost of living increase. 

Instead of doing a refi to pull the equity out of your primary home, is there a way that you could save up enough to purchase your first deal with a conventional loan OR do a value add deal and then refi out of that? If you can find a good enough deal, you can likely find a private lender that will finance it OR a commercial banker that will loan based on as appraised value. 

Get out and network with the people in your area. They can give you suggestions on how they are buying in your market with little money down. It's possible, but definitely takes some hustle.