Am i missing a big opportunity?

Question

Hello all,  I am a young real estate investor who is looking to buy their first property.

I think (emphasis on think) I have found a deal for me but here is my situation: I am a recent college grad with no 2 year income (just yet) and I came across this property inHamilton, NJ, in which i need between 100k - 144k after all costs (rehab, closing, 20% down payment) I do not have this money as a 22 year old, so I naturally wanted to get an FHA loan but the problem is, its a quadplex that has all units occupied, so i cant really live here because there would be no space, unless there is a way around this. I would be able to come up with this smaller sum amount, since I have been saving.

Now, my father is the money man and could potentially help but even 100k-144k is a big amount of money, ALSO he just got his first house back in June 2023, which can impact pre-approvals, so what are my options here? How creative can i really get  IF this is even a good deal.

I have ran the numbers and for me, they check out, obviously I would do more digging if it comes down to actually purchasing this deal

So... my biggest concerns are that I want to get into my first property and if I find an opportunity, like perhaps this one, I don't want to miss it, but the amount of cash on hand is a concern, so I'm kind of stumped. Where should I go from here? How can I tell the banks "I'm not going to default" without the cash on hand?

Thank you for any help at all!!

Michael J. · Answer

First off, props to you for diving headfirst into the world of real estate investing at such a young age. That's the kind of hustle that gets noticed and pays off!

Now, about that property in Hamilton, NJ—you're right to think creatively about financing, especially as a fresh grad. Traditional bank loans might not be in the cards just yet due to your income history, but don't let that stop you.

Enter the world of hard money lenders and private money lenders. Hard money lenders are all about the property's potential, not so much your personal financial history. They might be more willing to bet on the deal you've found, especially if the numbers make sense. Higher interest rates and shorter terms are part of the deal, but they can get you that quick cash you need for the purchase and rehab.

Then, there's private money, which might come from individuals like your dad or other investors looking for a solid return. They might be more flexible and understanding of your situation but will still need a convincing pitch on the deal's potential profitability.

Remember, in real estate, there's always a way forward. Keep hustling, keep learning, and don't be afraid to take calculated risks. You're on the path to big things!

Wishing you all the success on your investment journey! Keep pushing, the world is yours for the taking!

David M. · Answer

@Ashley Guerra

some stuff...  Have you looked into a conventional loan with a "renovation option?"  same thing as a FHA 203k.  "203k" is a term specific to FHA.

There are all sorts of "w2" jobs.  For example, a tradesperson such as an electrician can have a W2 but is an hourly/wage worker.  So, its not a salary and the income isn't guaranteed.  A "white collar" worker with a guaranteed salary is different.  You can pretty much start from day 1 to get a loan.

Ashley Guerra · Answer

Looking back this deal was not at all right for me. I tried to fit in a shoe that was too big for me. However, if you have any guidance on my situation...I am 22 and looking to get into my first real estate deal this year. Why? I figured if the numbers make sense (i will get to those in a minute) and i can afford the house worst comes to worst, meaning not defaulting on the loan, i am willing to invest in the property. I'm currently looking for a multi family (2-4) in my local market: trenton nj. Homes ranges 250-350k. most of these homes need renovation minimum 10k most of the time. Now with that, i would want to go in fha203k loan or simply fha. Financially speaking, im still saving, but the goal is 50k saved up (all costs: closing, fees, down payment) by this summer with my fathers help on the cash. Why summer? I finally start my full time job, report 60k a year, which is not very high considering where i live and my home purchasing power. Now i have a question regarding when i can use my college degree and job as "proof of two years work" rule: when can i show consistent paystubs where i can be considered for a mortgage loan? I dont plan on leveraging my dad at this point since we wont qualify for an fha loan if he is on the contract, so i heard. With this said, how does this plan sound so far?feel free for any feedbackNote: that property was sold, it was a good deal, but it in no way fit my position

David M. · Answer

@Ashley Guerra

Are you looking to live in this property?  If so, have one of the units vacanted as terms of closing.  Its the only good legal thing allowed to landlords in NJ at least.

Note that conventional loans allow 5% down for multi-families now...

It sounds like even with your father's help, you still don't have sufficient funds, much less also having additional reserves...

What, may I ask, is your job?  Is it a salaried job?  A true salaried job doesn't need 2 year seasoning.  Do you even have your financing prepared?  It doesn't sound like it since there are no particulars.  You are dealing with hypothetical issues so far.

Its great you want to get "saving," but you know most people don't buy a house at 22.  From the way you put it, your father only purchased his first house 2 years ago.  Slow down, and don't push a bad position.  Inventory is tight, which means you aren't getting to see lots of potential deals.  You'd rather get into a good deal, than push into a bad deal.

Good luck.

Am i missing a big opportunity?

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