Need Advice: Frustrated and Stalled on Starting Again

Multi-Family and Apartment Investing
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Need Advice: Frustrated and Stalled on Starting Again

Mike Stillwater
Member since 2021 · 7 posts · 3 votes

Hi everyone.  Just some quick background on me, I'm a former investor who successfully house hacked 2 SFRs and cash flowed them for around 10 years.  I managed them myself and have a good agent who always found us good tenants that left our properties without vacancies for the time we owned them.  At the time I owned them I mainly used them as supplemental income and unfortunately didn't really see it as something I really wanted to expand on.  I've been successful with my career and I really didn't realize that I actually had a passion for investing in real estate.  To make a long story short my wife and I decided to sell them at the top of the market.  We used the money to purchase a better primary residence.  

It took me a year here at our new house to realize I wanted to start my own investing business.  After a lot of research and learning a lot of the things I didn't know about purchasing and managing the cash for the rentals I came up with my criteria and plan.  The frustration I ran into is I came up with a plan to use our large amount of equity in our primary as down payments for some rentals.  My wife ended up being completely against the idea and that left me with the inability to fund down payments and cash to close.  I've been spinning my wheels now for several weeks trying to come up with some way to come up with the money other than old fashion saving up which would take me several years.  Any advice would be greatly appreciated.  I've looking to buy multi-unit properties with the goal of buying apartments.

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Austen Mueller
Real Estate Agent · PA · Member since 2021 · 240 posts · 131 votes
4y

If you cant leverage equity in your home some Ways you could still invest in real estate would with as little money down as possible would be..... 

1. Do you have good enough credit to get a 3.5% down loan? In my market it's not impossible to buy a cash flowing asset for around 12k Down. Helping an investor right now do just that. Investing out of your state can be great if your market is too expensive. 

Getting Creative 

2. Seller Financing- If you get lucky and know someone who owns their house outright and looking to downsize and getting ready for retirement. If they want more steady income over the years VS cash in pocket tomorrow this could be a good solution/opportunity for the two of you. 

3. Subject to- No experience with this but if someone is really looking to get out from under a loan you can just take it over with a negotiable down payment. This will require some leg work to find

4. Syndication- Invest what money you have for a certain return. This option is more readily available, but doesnt promise as large of an overall return on cash invested. most passive.  

5. Renegotiate with your wife- Maybe not the most attractive option, But this is a problem a lot of people experience. You are not alone sir. I had to deal with it too. In my experience the "break through" moment came more so when I really started to listening to her concerns. I was in "the Know" and already did hours of research so everything to me sounded like a "no brainer" and common sense. I had to remember she did not have any of that. She just saw me ranting and raving frustrated she wasnt "getting it." It helped me to pitch it as if I was at a sales meeting, and not talking to my wife. And why not? She just of well have been a multi million dollar investor if she was standing in between me and my goal. Hope that helps 


Best of Luck in Your Journey. Don't Give up!  

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  • Austen Mueller
    Real Estate Agent · PA · Member since 2021 · 240 posts · 131 votes
    4y

    If you cant leverage equity in your home some Ways you could still invest in real estate would with as little money down as possible would be..... 

    1. Do you have good enough credit to get a 3.5% down loan? In my market it's not impossible to buy a cash flowing asset for around 12k Down. Helping an investor right now do just that. Investing out of your state can be great if your market is too expensive. 

    Getting Creative 

    2. Seller Financing- If you get lucky and know someone who owns their house outright and looking to downsize and getting ready for retirement. If they want more steady income over the years VS cash in pocket tomorrow this could be a good solution/opportunity for the two of you. 

    3. Subject to- No experience with this but if someone is really looking to get out from under a loan you can just take it over with a negotiable down payment. This will require some leg work to find

    4. Syndication- Invest what money you have for a certain return. This option is more readily available, but doesnt promise as large of an overall return on cash invested. most passive.  

    5. Renegotiate with your wife- Maybe not the most attractive option, But this is a problem a lot of people experience. You are not alone sir. I had to deal with it too. In my experience the "break through" moment came more so when I really started to listening to her concerns. I was in "the Know" and already did hours of research so everything to me sounded like a "no brainer" and common sense. I had to remember she did not have any of that. She just saw me ranting and raving frustrated she wasnt "getting it." It helped me to pitch it as if I was at a sales meeting, and not talking to my wife. And why not? She just of well have been a multi million dollar investor if she was standing in between me and my goal. Hope that helps 


    Best of Luck in Your Journey. Don't Give up!  

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  • Mike Stillwater
    OP
    Member since 2021 · 7 posts · 3 votes
    4y
    Originally posted by @Austen Mueller:

    If you cant leverage equity in your home some Ways you could still invest in real estate would with as little money down as possible would be..... 

    1. Do you have good enough credit to get a 3.5% down loan? In my market it's not impossible to buy a cash flowing asset for around 12k Down. Helping an investor right now do just that. Investing out of your state can be great if your market is too expensive. 

    Getting Creative 

    2. Seller Financing- If you get lucky and know someone who owns their house outright and looking to downsize and getting ready for retirement. If they want more steady income over the years VS cash in pocket tomorrow this could be a good solution/opportunity for the two of you. 

    3. Subject to- No experience with this but if someone is really looking to get out from under a loan you can just take it over with a negotiable down payment. This will require some leg work to find

    4. Syndication- Invest what money you have for a certain return. This option is more readily available, but doesnt promise as large of an overall return on cash invested. most passive.  

    5. Renegotiate with your wife- Maybe not the most attractive option, But this is a problem a lot of people experience. You are not alone sir. I had to deal with it too. In my experience the "break through" moment came more so when I really started to listening to her concerns. I was in "the Know" and already did hours of research so everything to me sounded like a "no brainer" and common sense. I had to remember she did not have any of that. She just saw me ranting and raving frustrated she wasnt "getting it." It helped me to pitch it as if I was at a sales meeting, and not talking to my wife. And why not? She just of well have been a multi million dollar investor if she was standing in between me and my goal. Hope that helps 


    Best of Luck in Your Journey. Don't Give up!  

     Austen,

    Thank you for the great reply. For #1 where can you get 3.5% down? I've contacted several lenders and none of them had such a low down payment. Everyone I called required 20-25% and I have an excelent credit score and my DTI is low. If it could get low down payments it would solve my issues for now. It would be harder to get cash flow if they require PMI but if it was the right property I could make it work. The lenders were broker, and Non-QM portfolio lenders, my bank even did both conventional and portfolio lending. None offered low down payment for investment properties. #2 They are petty rare out here and are considered land contracts in Michigan. I'm also looking for multi-family rather than SFRs. With such limited inventory, these are very hard to find. #3 it wouldn't hurt to ask if they had a lot of equity to cover the costs it might still not be enough. Would all depend on the loan balance and the equity position left and the ability to get a loan on the remaining balance. It could get tricky and the second could have poor terms and I might not be able to find the deal because there are a lot of buyers out there with better offers. #4 Syndcation seems very complicated and I honestly know nothing about it though I keep reading a lot of the big investors use it. #5 No offense but this one made me laugh because you dont know my wife. I agreed with everything you said but she has valid points that I have no answer for. Shes worried that I'll have loans tied up on our property and if we want to move it wouldnt be possible without paying off the HELOC. Yes, over time I would pay it off but I dont think it would be quick enough to make her say OK. I'd rather find another way then have to add another issue to have to debate with her about.

    Mike

    1Reply
  • Tuna Sakallioglu
    New to Real Estate · Jersey City, NJ · Member since 2021 · 30 posts · 9 votes
    4y

    #1 The 3.5% would be an FHA loan which you can get if you're planning to use this property as your primary residence for at least 1 year. I also heard about secondary home loan which I believe is around 10%, which might be something you can look into as well. 20-25% down payment is usually for loans that is for purely investment properties. I've also been hearing other loans that might help cover the down payment so that might be something worth looking into as well.

    #3 You don't have to deal with getting a loan in this case as the loan will still be under the seller's name and you will be paying the seller the P&I. There is a great BP episode on this with Pace Morby (527 I think) which I definitely recommend if you didn't already listen to it.

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  • Austen Mueller
    Real Estate Agent · PA · Member since 2021 · 240 posts · 131 votes
    4y

    @Mike Stillwater Do some digging but for the right loan but you may not be able to borrow as much for the 3.5% down. If your buying through an LLC this will probably be a lot harder or impossible to find. And no offense taken lol I totally get.

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  • Mike Stillwater
    OP
    Member since 2021 · 7 posts · 3 votes
    4y

    Thanks for the replies. A 3.5% loan is for an FHA as Tuna responded. I worked in the mortgage industry for some time and was fully aware of house hack options as I've done it twice but it won't be happening again as I just bought a new home that I won't be renting out. 20-25% down is customary for investment properties and more so on the 25%.


    Tuna, 

    I might have watched it but I will check again.   To be honest I already spoke to my agent about seller financing as he only works with investment buyers/sellers and he said it's very rare to get low down payment terms from seller financing.  He said in Michigan it's considered a land contract and most sellers want a strong down payment and a short term.  Considering how low inventory is right now my chances aren't the greatest in obtaining seller financing so low but it wouldn't hurt to ask.  I don't want to seller finance and not be able to refinance due to them requiring 25% equity also which would leave me still short.  That could put me in a dangerous situation where I wouldn't have enough funds to cover it depending on the purchase price.

    Mike

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  • Evan Polaski
    Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
    4y

    @Mike Stillwater, you could seek a partner that helps with some of the cash needs.

    But focusing on your wife, I think this is just typical marital compromise. I have had many of the same conversations with my wife, especially early on. She was (and still somewhat is) anti-debt. If you are concerned about paying off a HELOC, would she be open to using a HELOC for flips? My wife was open to that, since there was a clear exit and payoff of the loan. The profit then goes into the rental fund to save for a downpayment, while the HELOC is your dry powder for flips.

    Additionally, of course you hear her concerns, but approaching this in a way that can help her achieve her goals will probably go further.  Just addressing concerns keeps the mind in a negative state, but focusing on the positives might help her come around. 

    And just like all investing is a risk, "convincing" a spouse of something they don't buy into is a big risk too.  If the rentals go south, then you have both a financial burden, compounded with marital issues.

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