How did you get your first financing?

Question

So I am wanting to get started in real estate investing in Columbia SC, I am coming across loads of deals which interest me but I never want to commit because I am worried that I won't be able to finance them.

I have good credit (730) but only about 10-15% down so I am looking for alternative financing but I have no idea where to start. Has anyone gone through a similar situation and if so how did you solve it?

Would love to hear any advice on the topic!

Account Closed · Answer

Hi Henry, pleased to meet you. Subject To is actually what I do. I buy properties by "taking over" the mortgage & the payment of the mortgage and then I control the property. Ownership transfers to me. I always have $50,000 or less into the property. I give the seller their equity and they move out. Oftentimes I have under $25,000 into the property. Then I sell the property to Tenant Buyers who give me $25,000 plus or minus down. So, essentially I have zero into the property at that point. I collect a payment from the Tenant Buyer "up front" as a down payment, usually within a month from when I've bought the property. Then, their monthly payment to me covers my payment on the mortgage and usually I get $500 to $700 per month *more* than the payment I am making. I make my payments on the underlying note and keep the spread (the $500 to $700). I am happy for the contract to run for as long as the Tenant Buyer wants before they refinance out. The longer it runs, the more I make. So, typically on a $200,000 property, I spend about $25,000 to control it, I get $25,000 back out immediately from the Tenant Buyer, I have a spread of $6,000 to $8,400 for each year, so a note that pays off in one year totals $31,000 plus or minus and a ten year total is $109,000 plus or minus. I don't know how to calculate CoC or ROI on this, but I love the numbers. Regards

Doug Pretorius · Answer

Account Closed Don't start slacking off now ;) Seriously, nicely done my friend!

Account Closed · Answer

Doug, sorry to say I only got $20,000 Option payment on this one but I will try harder next time. ;-) Yes, $20,000 - $25,000 payment is typical for me. I did one where I got $40,000 Option Payment on a $250,000 property South of Austin TX. I had one guy in AZ want to give me $120,000 on a $275,000 property but it was all the money he had and he didn't have an income. I couldn't (and did not) take the money. There is more money out there than most people realize. I figure the more skin they have into the game the less likely they are to trash the place or walk away. Plus it helps fund the next acquisition and the next and so on.

Account Closed · Answer

I started by using Subject To. No bank needed.

Henry D West · Answer

@Grant Rothenburger Yes I think that's what I want to do. The only problem is that I am tied into a 1 year lease on a college apartment and to house hack you need to live in the property. Co signing is a good option, Im just not sure it would be a good idea for anyone to cosign as I have never done a deal before! Thanks for getting me thinking, really appreciate it.

Doug Pretorius · Answer

@Henry D West My first deal was a lease option. No down payment, no mortgage.

Doug Pretorius · Answer

@Henry D West I do much the same thing Account Closed except that I use a lease option or agreement for sale (commonly called a land contract or contract for deed in the states) because they work better for me here in Ontario. The other exception is that I don't pay the seller anything upfront. If they have equity it will be paid out when my tenant/buyer refinances.Mike, I'm blown away that you can get $25k down on a $200k property! The most I ever got was 10% on an $80k property and that was about 15 years ago. Typically I can get 3-5%.

Henry D West · Answer

Account Closed what is Subject To? Thanks for the input

Account Closed · Answer

Henry, just as an example, I just yesterday picked up a 4 bed 2 bath 1532 sq ft in Phoenix by taking over their loan of $169,000 using Subject To and giving them $5,000. It needs some renovation, is currently worth about $215,000 as it sits and about $285,000 after $40k of renovation based on comps. I haven't run the numbers on all of my options so I'm not sure which way I will take this one. I am "out of pocket" $5,000 total. No bank, no credit report, no hassles.

Grant Rothenburger · Answer

Happy to help. I would either wait out that lease or lose the deposit and leave early, don't get stuck paying both right now.