Where Do You Find the Funds for the Down Payment?

[Clint Miller]

Seller financing opens up great opportunities for real estate investors, but coming up with the down payment can still be tricky.

[Gregory Schwartz]

I have 1 partner who provides up to 75% of the down payment, however, my goal has always been to live below my means, save money, and invest the saved money as a downpayment. 

In the last 5 years, we've invested over $300k of savings toward down payments and rehabs. 

[Mike Grudzien]

Clint,
Was that a question or a statement?
Mike

[Chris Seveney]

Quote from @Clint Miller:

Seller financing opens up great opportunities for real estate investors, but coming up with the down payment can still be tricky.

 I do not see why a down payment in real estate is "tricky". You typically need a down payment for many things you buy. Its not tricky, it just takes discipline to save $.

[Stuart Udis]

Down payment funds may seem tricky to those who get lured in by the countless con artists on social media selling the notion 100% financing using other people's money is easy. There's also plenty of lenders who falsely represent the true capital requirements to originate their loans or are merely up front fee collectors.  Ultimately buying real estate without down payment funds is far trickier of a process.

[Alan Asriants]

Quote from @Stuart Udis:

Down payment funds may seem tricky to those who get lured in by the countless con artists on social media selling the notion 100% financing using other people's money is easy. There's also plenty of lenders who falsely represent the true capital requirements to originate their loans or are merely up front fee collectors.  Ultimately buying real estate without down payment funds is far trickier of a process.

 If you don't have the funds yourself, you need to develop a solid relationship with those that do. They also have to trust you.

[John Morgan]

I've bought 5 houses by using 401k loans as down-payments. I've bought some houses with 0% interest for a year credit cards and a few with consumer lines of credit from banks. I use all the rental cash flow to pay these loans off asap, then repeat. I've also used a HELOC to buy a couple houses. And don't forget about tapping into equity if you have any. I bought 14 houses basically for free by harvesting the equity in my houses by doing 5 cash out refis. I use that cash to scale up and buy more cash flowing houses with zero $ out of pocket. That's how I've grown my portfolio of SFR without using hardly any of my own money.

[David Fern]

I work 2 jobs. 1 to live off, and the other for down payments. I've been able to buy a rental house a year for the last 5 years. I figure REI is like most other things in life… hard work and persistence will get you there. A tiny % of people can avoid the hard work by getting creative or lucky, but most have to work hard, take action, and be patient.

[Cory King]

there's people out there who will fund downpayments for equity in the deal or a preferred return. hit up local meetups and facebook groups and have some conversations

[Jeremiah Dunakin]

Quote from @John Morgan:

I've bought 5 houses by using 401k loans as down-payments. I've bought some houses with 0% interest for a year credit cards and a few with consumer lines of credit from banks. I use all the rental cash flow to pay these loans off asap, then repeat. I've also used a HELOC to buy a couple houses. And don't forget about tapping into equity if you have any. I bought 14 houses basically for free by harvesting the equity in my houses by doing 5 cash out refis. I use that cash to scale up and buy more cash flowing houses with zero $ out of pocket. That's how I've grown my portfolio of SFR without using hardly any of my own money.

 John I’m so glad to see others pursue this way. I have one single family rental now. I used 401k loan to get money for down payment and repairs. It is the best money I’ve ever spent. I can take two loans out and I am looking to do it again as my first loan is about paid for. I am paying original loan off two years early. Even if I do exact same thing I will have two houses instead of one to pay loan back. Again very nice to see others pursue this avenue 

[John Morgan]

Quote from @Jeremiah Dunakin:

Quote from @John Morgan:

I've bought 5 houses by using 401k loans as down-payments. I've bought some houses with 0% interest for a year credit cards and a few with consumer lines of credit from banks. I use all the rental cash flow to pay these loans off asap, then repeat. I've also used a HELOC to buy a couple houses. And don't forget about tapping into equity if you have any. I bought 14 houses basically for free by harvesting the equity in my houses by doing 5 cash out refis. I use that cash to scale up and buy more cash flowing houses with zero $ out of pocket. That's how I've grown my portfolio of SFR without using hardly any of my own money.

 John I’m so glad to see others pursue this way. I have one single family rental now. I used 401k loan to get money for down payment and repairs. It is the best money I’ve ever spent. I can take two loans out and I am looking to do it again as my first loan is about paid for. I am paying original loan off two years early. Even if I do exact same thing I will have two houses instead of one to pay loan back. Again very nice to see others pursue this avenue 

Yeah, it’s worked out well for me. Several people told me I shouldn’t do this, but it’s one effective way that helped me scale up to 29 SFR in 9 years. I pay my loans off aggressively with the rental cash flow then keep repeating. For me it’s been the fastest way to scale up along with my cash out refis to harvest the equity. 

[Dominic Mazzarella]

Here are a few strategies to consider for funding a down payment:

1. Partnering: Like Gregory mentioned, finding a partner who can contribute to the down payment in exchange for equity or a profit share is a solid option.
2. HELOC or Cash-Out Refi: If you have equity in your home or another property, a home equity line of credit (HELOC) or cash-out refinance can provide the funds you need.
3. Private Money: Reach out to friends, family, or private investors who may be interested in lending you the down payment with a promissory note.
4. Seller Second: In some cases, the seller might agree to finance a portion of the down payment as a second mortgage.
5. Live Frugally and Save: It takes time, but reducing expenses and setting aside funds from your income is a tried-and-true method.

The right approach depends on your situation and deal structure, but a mix of creativity and resourcefulness can go a long way. Good luck!