All Forum Posts by: Scott Gordon

I am going to look at my first potential rental property on Tuesday and I am currently in the process of trying to think of the most appropriate way to finance my first deal - finance including down payment, renovation costs, closing costs and mortgage.

I have enough between my cash funds and taxable brokerage account that I could pay for the down payment, reno costs and closing costs with cash, but that would basically wipe out my emergency fund. I'm perfectly fine dealing with risk, but wondering how much risk is appropriate to take on.

I have about $50k in equity in my personal home and I always see mixed reactions about using a HELOC or Home Equity Loan for rental properties: some people saying absolutely put your equity to work so you can use 'other people's money' and keep your cash reserves, while others say absolutely not, don't put your personal home at risk of being foreclosed if the unthinkable happened. I'm assuming this wouldn't be much of a concern given I could always wipe out my emergency fund to pay off the HELOC or Home Equity Loan if the unthinkable did happen. I would have had plenty in my 401k to take a loan on it, but just before I got into REI, I rolled over my 401k to a traditional IRA when I changed jobs so my 401k is depleted now. I am currently looking into whether or not my company allows traditional IRAs to be rolled back into a 401k.

Thanks in advance for any feedback!

Hi All! I've been reading through old posts trying to find the answer to my question, but didn't have any luck so I figured I'd make a new post.

I am currently on the hunt for my first property - I found one where the numbers all work great on paper, and I plan to tour it within the next week. What are some things I should do prior to purchasing my first rental property? Things that come to mind are: getting pre-approved (is this always necessary?), opening a business checking/savings account, etc.

As for touring my first property - what are some things I should do, ask, look for etc. I have a realtor who has been great in giving me tips and suggestions along with friends who do REI as well but wanted to get this group's thoughts. This specific property has existing tenants (15 year and 2 year...it's a duplex), no pictures of the inside were posted on the listing. The outside definitely needs some work, may have potential water damage on the front porch as far as I can tell from the pictures. Would it be smart to bring a contractor with me on the tour to be able to give me rough ideas for how much renovations would cost to make an informed decision? Anything I should ask the selling agent prior to touring the place to identify any causes for concern before wasting their time touring the place?

Any tips are greatly appreciated - anything you've learned over time that you always do prior to buying a property and/or things you wish you knew before buying your very first property.

Thank you!

Scott

@John Alosio hmmm good question. A simple google search says yes as long as the plan allows. I’ll have to ask!

@John Alosio no problem! Working to build up my 401k at my new job, but will take some time or course

@John Alosio thanks for your response! Unfortunately, I left my job recently and rolled over my 401k to a traditional IRA. It doesn't work the same for a traditional IRA as well - I was thinking no?

Hi All!

I am currently looking for my first investment property. I’d love to hear some of your ideas for creative funding options. I have a 6 month personal emergency fund and a nice sized retirement portfolio, but since I wasn’t thinking about RE before, I don’t have a lot of liquid cash because everything above and beyond my emergency fund goes to my investments. So I am considering all options now:

- saving up for a year and pausing my contributions to my retirement accounts

- HELOC (low on the totem pole because I don't want to put my primary residence at risk)

- Trying to take a loan against my retirement accounts if I can do so without penalty

Looking forward to hear your thoughts, thank you!

Scott

Very interesting, thank you!! I will definitely take the referrals if you don’t mind - once I’m ready to go I’ll give them a call. 

I don’t know how I haven’t heard that from Brandon yet - thank you!

If he brought the money, would an LLC still be required even if it were a one time deal? Any suggestions on where I can read up on how that works and what legal paperwork we'd need to have signed to protect both of us?

Thank you!

@Bret M Rankin thanks for the feedback Bret!

I’ve been friends with him for 5+ years and I trust him, I just worry that I’ll be the only one bringing knowledge to the table from researching and he’ll just learn on the job. He has a good bit of money set aside since he’s been planning to do this for so long, so I just keep wondering if it’s worth it. He did say he’d be willing to do it on a one deal basis by providing the cash for the deal and then we could decide if it’ll work out long term afterwards,

I’m happy to hear that partnership has worked out for you! I have another friend who wants to partner as well that has done an equal amount of research and learning, but he’s not looking to buy another property for a year or so since he is about to close on his first property. So I’m trying to find the best way to jump in with minimal cash invested until I save up money outside of my retirement accounts.

TLDR: How do I handle an offer from a friend to make the cash deposits (down payment, closing costs, renovation costs)? I love the idea of my money staying out of my first deal, but want to understand if anyone has done this before, how it worked and how you managed the legalities behind it (plus mixing friendship with business).

Hi All - I have spent the last 4+ months reading and learning about personal finance/real estate investing more specifically and am about ready to jump in and get my first property. I do have the capital to do so on my own, but would basically be using all of my money I have set aside if I did so. I have a friend who has been raving about real estate for the past 5+ years but he is the type that just goes off of what he sees others doing and what they tell him to do, but never takes the time to read/learn on his own so he has never pulled the trigger and got into it himself.

Now that he knows I am interested and ready to get into it myself, he's asked if I would be interested in partnering up. I know he wants to do this because he realizes I took the time to learn everything and all he would have to do is split the cost and reap the benefits. I told him I wasn't interested in a full partnership long term, but am considering private lending at least for my first property to keep the money I set aside readily available in the case of any emergencies. He was really interested in that, and said that he wouldn't expect a 50/50 split, but basically that he'd get his money back plus 10-12% (more than what he'd get on the stock market and in the mean time he would love to help me manage the property so he could learn hands on. He works overnight so he would actually be helpful during the day if I ever needed something done. I think he is wanting to prove he could be a valuable long term partner potentially.