Where do you come up with the down payments, rehab, closing costs for new investments?

Question

My wife and I just bought our first rental and we are very excited!

Now we both have good jobs that pay well. Our goal is to test the investment waters and if we like it, purchase more homes to help with retirement income years and years away. We have been pretty conservative ensuring not to over extend ourselves and that we could pay the expenses on the house even if it sat there vacant forever, hopefully this will not happen…At some point we will make a decision if rentals are for us or not. If we decide to stay with it I don’t think we could be as conservative with the next house plus saving up for the next round of upfront costs will take some time.

To my questions:

From what I understand down payment is normally 20% of the purchase price. HomePath is the only option I know of requiring < 20%. On top of that you need rehab money and closing costs. A 50k property adds up to be: 10k down payment + 1.5k (3% cc) + ~5k (obviously variable) = $16.5k for each property

Do you all simply have cash reserves just waiting to be used? Do you pull cash out of other properties? Partners?

Thanks in advance!

Jeff Solberg · Answer

Thanks everyone :)

Sounds like the first few will be on us and saving. Nothing wrong with that. We will have to investigate other means as we gain experience.

I love the idea of free and clear and that definitely is where we want to be, however, there are just so many deals right now and with interest rates so cheap I'm thinking I would rather use money to acquire right now vs pay down or buy outright.

On a side note, I found BP a few days ago and it is has been a wonderful resource already. Thanks so much for taking the time to help me out.

I will definitely be reading through all these forums.

Rob Gillespie · Answer

Hi Jeff,
That is a huge problem that everyone faces. You can do one of two things. First, you can have a plan that only allows you to invest when you are being creative with the deals. This would involve taking over a property without using any cash or credit. There are a lotta ways to do it, but I dont wanna write a novel in this post! LOL!

Next, I like the plan that I use. I like to flip contracts to make an income, and buy my rentals without a mortgage. I am not a fan of leveraged real estate. ( I know I am a minority, but I like free and clear!) Hope that helps a little. Good luck man!
:mrgreen:

P.S. Congrats on your first rental!!! Taking action in this biz is the toughest thing for most folks!

Rob Gillespie · Answer

Hi Jeff,
That is a huge problem that everyone faces. You can do one of two things. First, you can have a plan that only allows you to invest when you are being creative with the deals. This would involve taking over a property without using any cash or credit. There are a lotta ways to do it, but I dont wanna write a novel in this post! LOL!

Next, I like the plan that I use. I like to flip contracts to make an income, and buy my rentals without a mortgage. I am not a fan of leveraged real estate. ( I know I am a minority, but I like free and clear!) Hope that helps a little. Good luck man!
:mrgreen:

Joel Block · Answer

The first deal or two, you may have to use more of your own resources, but as you get better at this, other investors who have less experience and skill than you will want to entrust their resources to you. That is where the money is. If you can be the quarterback and get investors to give you the capital to manage, you can take interests in properties for little of your own money but with dramatic upside. That's how the big boys do it. JGB

Shanequa J. · Answer

VA Vendee requires 5% down. Some people wholesale to get money while others use private/hard money. I do it the boring way by saving 20%. However, I'm now trying subject to owners which is one of many types of seller's financing.

Where do you come up with the down payments, rehab, closing costs for new investments?

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