Very Low Down Investing for Massive Growth

We've been buying houses for anywhere between $440-800 recently. 100% financing. 

My first thought if I heard someone else say that would be, "That's risky..."

I'm going to quickly explain what we're doing, how you can do it and why I think it's less risky than putting 20% down.

I am by no means a pioneer in this method. Essentially we're using the BRRRR method using a private lender that funds 100% of the initial purchase price. I thought this person would be hard to found us and since then I've found many others who want to fund our deals.

Traditionally I've bought rentals via househacking or putting 15-20% down, then after the purchase I've paid for the rehab out of pocket. I've only been doing it this way since 2016. Starting in late 2020 a partner and I pulled off a successful BRRRR where we only had a few thousand left in a deal that cashflowed well. We bought the project with cash, paid for the rehab with cash and then refinanced with a local bank. Recently we've been buying houses with a private lender's cash, rehabbed out of the cashflow that our other properties are making and then later on refinancing with a local bank. It's essentially the same process but we've swapped where the cash is coming from and we're paying that lender 7% to use their cash. We have the cash to do these deals but made a decision as a partnership that we'd rather use someone else's cash short term to do it if we could. 7% interest on a few hundred thousand over a 6 month period isn't as much as you'd think, especially when it's interest only which is how we've structured it. On a $100,000 loan the payment is roughly $584 a month and the principal is returned when we refinance. 

It feels like cheating. This should be harder or cost more I think to myself. But in reality it's a win win and there are many people out there who would love to lend to you, the experienced real estate investor, especially when it's secured by a first position lien on a home. This changes when the lien is second position or more simply put if you're borrowing for a down payment or a second loan. This can certainly work and I know people who do this but that's not what we're doing.

Why what we're doing works and why we're easily able to get investors is that we've been doing it successfully and can show that. We also have the money and have been using our own money for quite a while. The private lender knows if things go bad we'll make it right asap. No problem.

So why would we rather use someone else's money at 7%? Seems silly at first glance, and expensive. Our main reason is that we can only move so quickly using the BRRRR method and our own capital. Right now as I write this we have over $400,000 lent out from the private lender and I hope to have more soon. That is more than my partner and I would be able to pull together to go in 50/50. Another reason is that we're able to keep piling up money, while also not being in anything with over 80% leverage in the end. Because we have such healthy reserves we can deal with almost any issue that pops up.

Another reason we're doing this is that we want to have capital ready to deploy if a great opportunity comes up where we can't borrow money and have a quick plan to get it back to the lender. Borrowing this money only works because we're only doing it for several months at a time. We couldn't make the numbers work with all of our expenses and debt at 7% on a long term hold and hit the cashflow numbers we want.

You can do this too. Maybe not right now but it is possible for anyone if you build your reputation right. The first thing I recommend doing if you're not currently an owner of rental properties is to Househack. If you don't know what that is check out the book Househacking by Craig Curelop. After you've done a househack or two (I've been doing it perpetually since 2016) start buying rental properties with your own money. Now you have a track record and you aren't just someone talking about real estate investing. Next read BRRRR by David Greene. I didn't make any of this up, it's all in that book. After you understand the BRRRR process do a few yourself or with a partner, tell everyone about it. Post on social media. You'll start to get attention and people will want to get a piece of what you're doing.

 Get out there, get started and start building your wealth! It's not a quick endeavor but anyone can do this. I started with an annual income of $37,000 and $6000 in the bank. Learn to manage your money, then learn to grow it, then learn to grow others money for them. It's a simple path, but requires hard work and sacrifice. You can do this!