Newbie Trying to Make a Deal

[Christian Bateman]

Hi All, I'm a newbie to the real estate investing game, currently house hacking a duplex in Bremerton, WA and working in Seattle. My wife and I have a goal to get 10 duplexes here in the area over the next 10 years, but we're realizing it will be difficult to do that with just the money from my job.

To get around that, we have some private money lenders who we've spoken to willing to do private loans for a 20% down payments (~$40K, 5 YR Term at 7% interest, works out to about $800/month) on deals that cashflow close to the loan payment. Duplexes in the area go for ~$245K and rent $850-$1100/month/unit. Mortgage payment for a $200K 4.25% Interest Loan + Taxes + Insurance would put us at ~$1.2K/month. The area has occupancy rates around 95%, pretty good renters market, and factoring in $200 of maintenance/month puts us in the $1.4K/month area.

Is this a way you have made deals work in the past? Is it kosher to get private money loans for down payments on conventional loans with lenders? I know some lenders don't allow it, but is it possible? Would you structure a deal like this? Why or why not?

Thanks for your thoughts!