Where to find hard or private money in Denver?

Question

My wife and I are both 26 and make 52k and 70k a year respectively. We are looking to buy our first investment home and currently have about 10k saved towards it. We can consistently save a minimum of 2k per month as we have recently paid off all debt except for our current mortgage.

Would you guys recommend continuing to save or leveraging in order to make our first buy? A little nervous to use someone else’s money on something I have little experience with, other than on here and the books I have read. Hopefully you can give us some insight into how you all went into your first deal and the risks you took.

Matt M. · Answer

It'd have to be a smoking deal to make that work with a HML. You'd have to hold it and then refi it at appraised value after seasoning.

Looks like you've got a little one. Do you have 6 months of reserves? If not, then save for that first. **** happens.

Then you can save for a rental. You'll need 25% down. Your fastest bet would be to turn your current home into a rental and move into a new one without putting much down. The numbers have to make sense though.

Michael Glist · Answer

10k will make it tough here in Colorado but not impossible. I would suggest talking to a few lenders hard money and private and see what their requirements are. This will let you know if you are ready to go now or if you would need to save up more before getting started. Also make sure if you plan to flip your current home into a rental (which is a great way to get started) that you confirm with a good local mortgage lender that you would qualify for the purchase of the new home as well as the rental since in most cases since you do not have a history of rental income they will not count it as income so you would have to qualify for both mortgages which is tough since it greatly increases your DTI.

Caleb Jordan · Answer

10k probably won't be enough to start with a HML company. If you find an individual who will fund 100% of a deal that may work. Most HML want 6 months of reserves, and skin in the game such as downpayment closings costs. 10k is usually not enough especially if you are looking at your local market. If you equity in your house You could look at a heloc.

Keep saving and keep your eyes open for a deal. If the right one comes along your it makes sense and you are comfortable leveraging then go for it.  Build your war chest in the meantime though.

A hard money lender probably won't fund a junk deal so it adds some protection if you do decide to go that route.

Kevin Ravenscroft · Answer

@Andrew Bradley

Andrew, thanks again for the feedback. This is excellent advice, it makes sense to be more specific about what I can offer instead of,”whatever”. I do need to take a moment and figure out how my skills can translate, as I have little experience in RE or rehabbing. I was a mechanic at my previous job so I am certain that I can pick up on the nuances of rehabbing fairly quickly. I am currently a manager at a distribution center and I am sure I can find how the skills used here can carry over. As for the seminars and meet ups, thank you for these suggestions, I would love to start attending and surround myself with people of similar goals.

Grant Rothenburger · Answer

@Kevin Ravenscroft

I would save for another 10 months and get to at least $20k saved for DP. Get that education in the meantime!

Andrew B. · Answer

@Kevin Ravenscroft

Sounds like you are in a good situation with flexibility. I would suggest attending meetups. There are a lot of them around Denver. Check on BP here: BP Events and you can also check out MeetUp.com. Just start going to seminars on topics you want to learn more about, events that look intriguing, etc. but exercise some discretion especially when they are charging money. I'm not all that far ahead of you in my investment adventure. Just get out there and talk abut what you are trying to accomplish. I just went to an awesome event hosted by Gathering of BadAss Real Estate Investors last night and met some great people.

Also, use this forum. Be active, ask questions, contribute to conversations, reach out for help.

Lastly, I'd suggest not just approaching a potential partner or other investor saying you are willing to help with whatever. Take some time to evaluate and know your skills and offer to bring them true value to their business. That will go a lot farther than just volunteering for "whatever". If you build websites, offer some updating or SEO. If you are good with your hands, offer to take on some simple maintenance for them. If you have a large network of people, leverage their skills and be a "connector". Tons of opportunity in this area. Leverage your strengths.

Good luck.

Kevin Ravenscroft · Answer

@Bill S.

Thanks for the feedback Bill, I did mean .8 to 1.1%. I can see how it would be tough to reach that in this market, so using it as only a guideline makes sense.

Thank you all for your help!

Bill S. · Answer

@Kevin Ravenscroft you mentioned rents at 0.08-1.1% (I think you meant 0.8%-1.1%) of home value to price rents. Typically I would do that the other way around. Rents are set by the market. Look on Zillow and Craig's List and see what people are asking for in the area you are considering. If you watch them over time, you will get a pretty good idea of what rents are. You then use the percent rule to back into the price that you filter the offered homes through. Most of what I see offered these days is more like 0.5%-.75%. I haven't seen any 1% homes in the past year but I don't doubt there are some out there in some of the rougher neighborhoods since I don't watch the MLS regularly.

Kevin Ravenscroft · Answer

@Andrew Bradley

Thanks for the response Andrew, saving is the plan for now. As for partnering, time and effort are not an issue. I do work a full time job but have 3 days off a week and intend to use that time towards investing, rehabbing, learning, etc. However, I don’t really know anyone who invests, rents, or anything similar. Any thoughts on how to start meeting people like that in our area? Even if not partnering, I would love to spend some time helping someone to gain experience, in anyway they might need.

Kevin Ravenscroft · Answer

@Matt M.

Thanks for the input. Yes, my little guy is 8 months old! I would like to be as prepared as possible so waiting a little longer isn’t the worst, we have no other debt so saving isn’t a problem. I know that great deals are tough to come buy in this market but they are out there, so I will continue to save until I find one that works and make it work when the time comes.

Where to find hard or private money in Denver?

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