Real Estate Investing Basics

The Comprehensive Guide for Financing Your Very First Real Estate Deal

Expertise: Real Estate Investing Basics, Personal Development, Business Management, Personal Finance
46 Articles Written
finance-first-deal

Are you someone who wants to buy investment property, but you just can’t figure out how to finance your first buy? If so, this article is written for you.  

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What follows are seven different ways to finance your first property. Before that, I’ll also share ideas to make sure this first purchase fits into your overall wealth building strategy so that you don’t waste time going down the wrong paths.

To begin, you should know that every successful investor began right where you are. Just like the longest journey always begins with the first step, enormous real estate wealth begins with your first deal.

I remember very well being a 23-year-old standing at the edge of my new venture into real estate, asking questions like:

  • “How am I going to do this?”  
  • “How will I raise the money for my deals?”
  • “Will the lessons I’ve learned actually work for me?”

It’s normal to have apprehension and self-doubt before starting something important. But the anecdote for this ailment is a big spoonful of knowledge and another big spoonful of action.

I’m going to give you my best in the knowledge department right here, and you’ll have to do your part by taking action on what you learn.

Is that a fair deal?

Now, let’s move on to financing your first real estate investment!

succcess-trait

Strategy Before Details: The 5 Wealth Building Stages

Jumping into borrowing a lot of money against real estate before you understand the bigger picture is sort of like taking off in an airplane without knowing how to land. You may successfully get off the ground, but good luck trying to find your destination and land in one piece!

Here’s the big picture of wealth building as I see it.

The wealth you will build from real estate will allow you to have more freedom, more flexibility, and more time to do what really matters. You can call this financial independence, retirement, freedom, or whatever you want. It’s the peak of the mountain on your wealth building journey.

To reach this financial peak, you have to build a large net worth (a.k.a. equity) so that you can eventually live off of the income from your investments and never have to trade hours for dollars again.

But before you reach that final stage, there are other milestones you’ll pass as you climb the financial mountain. These intermediate stages are important because they determine your overall real estate strategy, which includes how to finance your deals.

Related: Real Estate Financing: The 4 Best Ways Savvy Investors Fund Deals

Here are 5 stages you’ll pass during your climb:

  1. Survival is the milestone when you’re earning some money and getting your bills paid. It’s also the place where you’re digging yourself back out of financial holes you dug in the past.
  2. Stability is like Dave Ramsey’s first three baby steps. You pay off personal debts, you have cash reserves in the bank, and you build job skills that are in demand and command a better income in the marketplace.
  3. Saver is the stage where you realize the importance of your savings rate and put it into practice. Building wealth is actually simple, but it’s not easy. You need to maximize your income, simultaneously decrease your spending, and set aside a lot of money. Below average wealth builders save 0-10% of their income, but above average wealth builders save 25%, 50%, and even 75% of what they bring in. The faster you want to reach financial independence, the more you need to save.
  4. Growth stage is where most of us think of investing. It’s taking your $50,000 nest egg and turning it into $1,000,000. The key is to maximize compounding by reinvesting earnings, buying good assets, and maintaining discipline.
  5. Income stage is when you already have a large chunk of equity and you’re ready to enjoy the fruits of your wealth-building labor. The objective here is to turn equity into regular income that gives you time, freedom, and flexibility.

Which of the 5 wealth building stages above best describe you? Are you in survival, stability, saving, growth, or income modes?

Don’t beat yourself up wherever you are. Everyone has to climb the same mountain, and the fact that you’re doing it now is all that matters.

Once you know your stage, it will help you begin focusing on a real estate investment strategy.  

think-big

Choose a Strategy Before Your Financing

Your real estate investment strategy and your financing are closely connected. You’ll be in trouble if you just walk into a bank and say, “I want a loan so I can buy investment real estate.”

A strategy is your decision about which part of the real estate universe will best help accomplish your financial goals right now. You can invest in fix and flips, house hacks, mobile homes, commercial buildings, private notes, and much more. But you can’t do them all at the same time on your first deal.

So, a strategy is about focus. It will help you get the right financing on your first deal.  

If you’re working on wealth stages #1 or #2—survival or stability—keep in mind that you need a job or a side business more than you need investing. Investing takes your cash, and you need to put more cash in your pocket right now.  

I wrote in more depth about 7 ways (other than wholesaling) to make money in real estate as a newbie. Most of these don’t actually include you borrowing the money because other people will buy your deals, but you’ll learn a lot about financing in the process.

If you’re working on wealth stage #3, saver, it can make sense to begin purchasing and financing investments. Real estate is a great forced savings plan. Many people say it’s bad that real estate is illiquid or hard to sell. I say it’s GOOD. You’re forced to leave it there and not spend it!

If you’re in this stage, a great place to start is with house hacking or live-in flips. You have to live somewhere, so why not multi-task and make your investment a savings tool? Owner-occupant financing programs like FHA or VA, which I’ll explain more later, allow you to get into properties with less down payment.

You could also get into house flipping and rental properties at this stage, but because you lack sufficient savings, you’ll need to leverage the down payment and reserve money of partners or private investors. This is exactly what I did early on.

Related: Newbies: You Should Focus on Your First Deal And Nothing Else. Here’s Why.

If you’re working on stage #4, growth, you should have the credit, income, and capital to jump into real estate investing in earnest. You could focus on the strategy of fixing and flipping houses, renting small residential properties, buying high cash flow rentals like mobile homes, or moving into one of the many other smaller niches of real estate investing.

In the section below, I’ll share some basic ideas below for how to finance your real estate with any of these strategies.

For stage #5 investors, the goal is typically not to leverage up but to deleverage. At this stage, income is a higher priority than maximum growth. You may still choose to have some financing, but I’m guessing if you’re in this stage you’ve already figured out most of the ideas I’m sharing here.

So, you’ve got your stage in mind, right? You have a basic idea of your strategy, and you’re ready to get started.

Now let’s begin unpacking the different possibilities to finance your first investment property.

invest-in-midwest

7 Types of Financing for Your First Investment Property

Below are seven solid types of financing for your first investment property. For each financing type, I will tell you:

  • What it is
  • The good
  • The bad
  • Who can use it (i.e. owner occupied, non-owner occupied, 1-4 units, or any property)
  • Possible investment strategies with this financing type (i.e. house hacking, live-in flips, rentals, etc.)
  • Where to find this financing
  • Further reading for you to learn even more

If one or more of these financing types sound interesting to you, I recommend making it the primary focus of your education and your follow-up questions in the BiggerPockets Forums. That focus will help you become more competent and confident as you work on your first deal.

Here are 7 possible types of potential financing for your first investment property.

1. FHA (Federal Housing Administration) Loans

What it is: These federally subsidized loans generally have lower down payment requirements (3.5% as of 2016) and easier qualifying standards than other loans. They also have low, fixed interest rates for 30 years.

The Good: Easier to qualify, attractive terms.

The Bad: Fees can be higher than other programs, the closing process is not fast — typically limited to one deal at a time, major fixer properties won’t qualify.

Who can use it: Owner-occupied only.

Investment strategy: Good for house hacking or live-in flips, 1-4 units only.

Where to find it: Mortgage departments at banks, mortgage brokers, credit unions, large mortgage lenders.

Further reading: Check out this article on buying a duplex with an FHA loan to learn more details about this program.

wholesale-contract

2. VA (Veterans Administration) Loans

What it is: These are also federally subsidized loans only for U.S. military veterans. The terms of these loans are usually the same or even better than FHA, including a 0% down payment.

The Good: Easier to qualify, attractive terms, multiple loans are possible.

The Bad: Like FHA, closing process is not fast, and while multiple loans are possible, there is a limit based upon your maximum entitlement; major fixer properties won’t qualify.

Who can use it: Owner-occupied only.

Investment strategy: Good for house hacking or live-in flips, 1-4 units only.

Where to find it: Mortgage departments at banks, mortgage brokers, credit unions, large mortgage lenders.

Further reading: For more details on VA loans and using them to buy investment properties, read VA Loan: The Real Estate Investor’s Guide to Eligibility and Funding.

Related: Confessions of an Ex-Banker: How to Get Your Next Loan Approved, Guaranteed.

3. Conforming Loans

What it is: Conforming means the loan conforms to the rules and guidelines of mortgage giants Fannie Mae and Freddie Mac. While the requirements are a little more stringent than FHA or VA, conforming mortgages are still a great mortgage product for investments. Although 20% down or more is the standard for non-owner occupied loans, programs do exist for 5-10% down payments on owner-occupied loans if you hunt around.

The good: Attractive terms with low interest over 15-30 years, faster qualifying than FHA/VA.

The bad: Larger down payment than FHA or VA, limited to 4-10 loans; major fixer properties won’t qualify.

Who can use it: Owner-occupied OR non-owner occupied. Non-owner occupied typically requires more money down, higher interest rates, and other more stringent requirements.

Investment strategy: House hacking, live-in flips, rental real estate; 1-4 units only.

Where to find it: Mortgage departments at banks, mortgage brokers, credit unions, large mortgage lenders.

Further reading: Read this BiggerPockets article to learn more about qualifying for a conforming loan. Also, check out the Eligibility Matrix (8/30/16 version) put out by Fannie Mae to describe their requirements for borrowers.

find-a-mentor

4. Portfolio Loans

What it is: Portfolio loans are kept by the bank or lending institution that made the loan, unlike conforming loans which are sold to Fannie Mae, Freddie Mac, or other mortgage investors. This means the requirements and loan terms vary depending upon which lender you use. This was how I financed my very first deal, which was a fix and flip property.

The good: More flexibility, potentially larger number of loans than conforming, possible to get loans on fixer-uppers and commercial.

The bad: Terms are not typically as good as FHA, VA, or conforming loans, you may have balloons in 3-7 years and/or adjustable interest rates, credit and down payment requirements more strict than FHA or VA.

Who can use it: Owner-occupied or non-owner occupied; 1-4 units, multi-units, commercial.

Investment strategy: House hacking, live-in flips, rentals, fix-and-flips.

Where to find it: Banks (especially local ones), savings and loans, credit unions.

Further reading: Brandon Turner wrote a good article about how portfolio loans transformed his business. There are also many threads on the BP forums.

5. Hard Money Loans

What it is: These loans are asset-based loans, meaning the primary concern of the lender is the property serving as collateral. The individuals or small groups that make these loans are in the business of lending, so they can usually move fast, which makes them attractive for purchasing investment deals.

The good: Fixer-uppers are OK, technically no limit to number of deals, can often borrow all or part of repair costs.

The bad: High interest rates and other costs, may not loan to brand new investor who has no experience with real estate, typically short-term loans.

Who can use it: Non-owner occupied; 1-4 units, multi-units, commercial, land.

Investment strategy: Fix-and-flip, rental property (for purchase, will need to refinance).

Where to find it: BiggerPockets has a hard money lender directory. You can also usually find several lenders at your local real estate investor association.

Further reading: BP founder Joshua Dorkin wrote a good overview of hard money loans and BP Podcast #9 was about the subject. This article gives “8 Things the Experts Won’t Tell You About Hard Money.

wholesale-land-deals

Related: How I Find Private Money Lenders to 100% Fund My Deals (& How You Can, Too)

6. Private Money Loans

What it is: Private money lenders are individuals or their self-directed IRA accounts who make loans against real estate. Unlike hard money lenders, these individuals aren’t usually in the business of lending.

The good: More flexibility and faster closings than bank mortgages, potentially lower interest rates and costs than hard money lenders, potentially longer length of terms, and often lending relationships that last for years or decades.

The bad: You can’t walk into a bank and ask for private money. It’s usually a result of relationships with other local investors built over time. Because these investors aren’t in the business, there is usually a limit to the number of loans based upon their available funds.

Who can use it: Non-owner occupied; 1-4 units, multi-units, commercial.

Investment strategy: Fix and flip, rental property.

Where to find it: Networking online (like BP Forums or Marketplace) or at local real estate associations or business meetups.

Further reading: This area of financing is my expertise. I wrote about multiple sources of private money and my first BP podcast interview discussed how I got started with creative financing. You can also check out this private money guide from Ankit Duggal.

7. Seller Financing

What it is: Seller financing means the seller of a property accepts all or part of the purchase price in monthly installments. Unlike a bank, the terms are completely negotiable. The final result is just what works best for both you (the buyer) and the seller.

The good: Typically great interest rate and terms, small down payment is possible, no credit or formal approval process.

The bad: Requires negotiating skills and knowledge of real estate finance and contracts, not every seller has enough equity to seller finance and many with equity want cash (at least initially), you will need to fund your own repair costs.

Who can use it: Owner-occupied or non-owner occupied; any type of real estate.

Investment strategy: Best for rental property or house hacks; also works occasionally for fix and flips or live-in flips.

Where to find it: Direct mail campaigns and other ways to generate leads directly from potential sellers; also possible through knowledgeable real estate brokers.

Further reading: I wrote “Your Guide to Uncovering the Best Seller Financing Deals,” and Brandon Turner wrote the “Definitive Guide to Using Seller Financing to Buy Real Estate.”

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The Next Step is the Most Important Step

In this article, you’ve learned about identifying your wealth building stage, focusing on a real estate strategy, and then choosing a financing source for your first deal.

If you look at all of this information together, it could be overwhelming as a new investor. But the next step for you is not to learn everything. You don’t need to understand every single real estate strategy or financing source. You don’t need to worry about how you’ll do your second or third deals or how you’ll become a millionaire.

You just need to understand one strategy and one financing source and then go do it. The next step in your real estate journey is the most important.

Remember how I started this article? I said I’d share some information, and you’d take action.

It’s that time for the action. The real learning happens when you try to apply what you’ve learned.

Have fun and best of luck!

[Editor’s Note: We are republishing this article to help out newbies who have started reading our blog more recently.]

What financing source seems to be the best fit for you? What is your wealth building stage and real estate strategy? Is there anything I can help you with as you take action towards financing your first investment property?

I look forward to hearing from you in the comments below.

Chad Carson is an entrepreneur, writer, and teacher who used real estate investing to reach financial independence before the age of 37. He wrote an Amazon bestselling book Retire Early With Real Estate, and his story has been a featured on Forbes, Yahoo Finance, Business Insider, GetRichSlowly.com, the BiggerPockets Podcast, How to Money, ChooseFI, and more. Chad and his business partner currently focus on long-term rental properties and private lending in and around the college town of Clemson, South Carolina. Their portfolio of 90+ units includes houses, small multi-unit apartments, and mobile homes. In 2003, Chad and his business partner began real estate investing from scratch. They started by wholesaling and fixing-and-flipping properties. They also learned to rely on non-conventional financing sources like private lending, seller financing, and lease options, which remains their expertise today. After surviving the 2007 to 2009 real estate downturn (with scars to prove it!), they transitioned to more of a focus on student rentals. You can find more of Chad's writing (as well as podcast episodes) at CoachCarson.com.

    Kevin Andrews Investor from Seekonk, Massachusetts
    Replied about 3 years ago
    What a neat and organized article Chad! It breaks down everything nicely. And it explains what I’ve thought for some time now that I would most likely have to do a house hack or live in flip to get started unless I used a partner as I am on stage 3 of saving. Of course there are multiple options to get what we want. Just have to want it bad enough. Thanks for the article Chad.
    Chad Carson Investor from Clemson, SC
    Replied about 3 years ago
    Awesome, Kevin! Glad the article was helpful. House hacks and live-in flips are such great tools. If there were only two real estate investment methods I could tell people, it would be those. Best of luck with your savings plan. It’s a momentum game, and as you gather steam it will snowball and get easier.
    Calvin Waddy from Trenton, Michigan
    Replied about 3 years ago
    Stage 3, check! Fantastic article, Chad.
    Chad Carson Investor from Clemson, SC
    Replied about 3 years ago
    Great, Calvin! Go get that high savings rate! It makes everything else easier with the following steps.
    Zane Bradshaw from Cape Town, Western Cape
    Replied about 3 years ago
    Really awesome article Chad! I agree 100% on the ‘Take Action’ part of it all. I have been doing non-stop grinding for the last few days in terms of learning as much as possible with regards to real estate investing. It is a bit overwhelming, but I am so eagar to be as knowledgable as possible in every aspect of the things I want to do with my life. I am 18 years old, super amped for getting my first property in my name, so I can start flipping. I am constantly being told how I can’t do this and that because of my financial troubles (not having a job, nor any capital reserves), and it’s driving me insane! I have majority of my entire game plan for my first step of my real estate empire thought out throughly, but just about my last challenge is getting the appropriate fincancing to actually fund the investment. Also, I live in South Africa, so 95% of HML that people here use are US based, and those that contact me, saying that they are international lenders, I have trouble trusting due to scams.. So yeah, thanks for the article.
    Chad Carson Investor from Clemson, SC
    Replied about 3 years ago
    Hey Zane, thanks for sharing your thoughts and insights. Glad the article was helpful. 18 years old! That’s great! I got started at 23, and I faced some of the same naysayers. It’ll take extra confidence and grit in the beginning, but in the big picture you’ll be so happy you did it. The key on that first deal is just getting it under your belt safely. Don’t make any crazy moves. You’ll learn a ton and use that knowledge on the second, third, etc. Instead of hard money lenders, I’d focus on people I meet, know, and trust locally. There have to be people who’ve made a lot of money nearby. Start networking and hanging out where people with money hang out. Then start sharing your plan to buy property. If you have a solid plan, if you’re trustworthy, and if you know your market well, someone will work with you. Best of luck!
    Ramon Cuevas from Liberty Hill, Texas
    Replied about 3 years ago
    Great article, Chad. I find myself on stage 4 with around $85k saved between my roth ira and 401k. I own a primary home and my plan is to have my girlfriend get qualified for fha loan and buy a four plex in order to grow our portfolio. If her kids lived there full time or us part-time, would that be enough to qualify as owner occupant for fha regulations?
    Brian J Peterson from North Riverside, Illinois
    Replied about 3 years ago
    You’ll have to owner-occupy as your primary residence at that property for the first 12 months Ramon.. I don’t think anyone besides who’s on the loan will qualify as an owner-occupant unfortunately, but I’d look into that.. Just be careful, I’m sure there are plenty of penalties you’ll pay if the bank finds out you’re not living there, as a matter of fact that’s called Mortgage Fraud to be more specific.. I’m not sure about the legal ramifications but I can assume they won’t be easy on someone who did that.. “Mortgage fraud is a crime in which the intent is to materially misrepresent or omit information on a mortgage loan application in order to obtain a loan or to obtain a larger loan than could have been obtained had the lender or borrower known the truth.” https://en.wikipedia.org/wiki/Mortgage_fraud
    Chad Carson Investor from Clemson, SC
    Replied about 3 years ago
    I think Brian below is right – if you (or your girlfriend) apply for the loan, you (or she) are the one who has to live there. It might just be a timing issue. Could you sell your existing house and move in when them into the quad? If not, maybe you can get a non-owner occupied loan for the quad.
    Tyler Huntington from Long Beach, California
    Replied over 2 years ago
    Ramon, to answer your question, no it will not work for FHA. Needs to be true owner occupied. Underwriter will typically question the occupancy on a 4 plex
    Michael Maloney Jr. from Livingston County , Michigan
    Replied about 3 years ago
    Awesome article thanks for posting. Still in stage 1 with some reserves. Currently working on my primary residence by transforming lower level into a 2bed 1bath rental while living upstairs in a studio 1bed 1bath. So house hacking is what I’m focusing on now.
    Chad Carson Investor from Clemson, SC
    Replied about 3 years ago
    Love that plan, Michael! You’re taking advantage of what you’ve got (the lower level) and turning it into an income generating asset! Good luck building those reserves and moving on up to the next stage. Knowing which stage you’re in is half the battle!
    Roger Mojsiejenko Investor / Wholesaler from Stevensville, Michigan
    Replied about 3 years ago
    Great article and very clearly laid out for those who are new to investing. I talk to potential borrowers and investors on a daily basis and they only focus on the urgency to get the loan/cash and don’t want to hear about the “bad” that comes with the type of loan they are going with.
    Chad Carson Investor from Clemson, SC
    Replied about 3 years ago
    Exactly, Roger. There is no silver bullet. The best strategies and financing types also have their downsides. As long as we’re aware and starting with eyes wide open, we can deal with the negatives. Thanks for commenting.
    Chad Carson Investor from Clemson, SC
    Replied about 3 years ago
    Exactly, Roger. There is no silver bullet. The best strategies and financing types also have their downsides. As long as we’re aware and starting with eyes wide open, we can deal with the negatives. Thanks for commenting.
    Julie Ferrier Investor from South San Francisco, California
    Replied about 3 years ago
    This is a fantastic, concise and well-organized article. Thank you for putting it together!
    Chad Carson Investor from Clemson, SC
    Replied about 3 years ago
    You’re welcome! Thanks for commenting Julie.
    Tapanga Matthews from Mississauga, Ontario
    Replied about 3 years ago
    This one right here is gold! Thank you for the breakdown. I see homework in the near future *crunches numbers** Best Regards BP T.Matthews
    Chad Carson Investor from Clemson, SC
    Replied about 3 years ago
    Great to hear, Tampanga! Love that homework. Crunching numbers is fun around here at BP for all of us real estate nerds:) Best of luck!
    Victorina Evelyn Castillo from Brooklyn, New York
    Replied about 3 years ago
    wow WOW. Am a newbie. thanks so much. It propelled me to focus.
    Scott
    Replied about 3 years ago
    Newbie here, wondering if I can get some advice. Great article; it gave me the inspiration to ask a question I’ve been dreading the answer to for awhile. Sorry my reply is about a month late. My wife and I currently have $50K cash savings but NO income (quit my CPA job about 6 months ago). The plan we’re considering is house hacking a duplex-fourplex that will cash flow even with us occupying 1 unit. Then, live extremely frugally until our next deal–something we have experience with (covered living costs for 3.5 yrs during college with nothing but federal student aid). Realistically, could we qualify for an FHA loan with zero income? We both have excellent credit (800+). Thank you!
    Chad Carson Investor from Clemson, SC
    Replied about 3 years ago
    Hi Scott, First of all, thank you for reading the article and for asking the question. I think your best answer is going to come from a mortgage broker. But my guess is you would not be able to qualify for the FHA loan without some sort of job/documentable income other than the rental income. But perhaps you need to just think outside of the box. I first started buying properties without a regular job. I had to use non-bank sources. Check out my youtube videos on creative financing (https://www.youtube.com/playlist?list=PL5F-I4oW-y2GT1sXIBio2rEycQ6v38iyH) and the recent article I wrote on BP about creative financing sources (https://www.biggerpockets.com/renewsblog/creative-financing/). Hopefully those will give you some ideas. Best of luck!
    Scott
    Replied about 3 years ago
    Newbie here, wondering if I can get some advice. Great article; it gave me the inspiration to ask a question I’ve been dreading the answer to for awhile. Sorry my reply is about a month late. My wife and I currently have $50K cash savings but NO income (quit my CPA job about 6 months ago). The plan we’re considering is house hacking a duplex-fourplex that will cash flow even with us occupying 1 unit. Then, live extremely frugally until our next deal–something we have experience with (covered living costs for 3.5 yrs during college with nothing but federal student aid). Realistically, could we qualify for an FHA loan with zero income? We both have excellent credit (800+). Thank you!
    Ray Vidos Owner/ Investor from Lafayette, Louisiana
    Replied about 3 years ago
    Great Article. I need to know where to go for answers. Hadn’t had much success trading time for dollars, I am 57 seven years and looking to branch out on my own. I owned rentals with EX-Wife did maintenance, made the purchase form three units to four units and raised overall rent income built it was an upside down because emotion were involved from EX-wife point of view. Just finish a 15K upgrade on a high end single family unit. Before Upgrade appraisal was around 162K new appraisal is 199K in a depressed South Louisiana economy. Lots of distressed , flooded, and repo available in Lafayette no capital to take advantage of . ANY SUBJECTIONS?
    Chad Carson Investor from Clemson, SC
    Replied about 3 years ago
    Ray, thanks for reading and for commenting. I wrote an article earlier this year about getting started that you might find helpful in your situation: https://www.biggerpockets.com/renewsblog/2016/01/13/wholesaling7-paths-instead/
    Braiden Kurowski Real Estate Agent from Glendale, Arizona
    Replied about 3 years ago
    Great read! I would probably go with seller financing for my first deal or potentially hard money lending! It’s definitely a lot of information but very useful to get focused to make just that first deal happen.
    Chad Carson Investor from Clemson, SC
    Replied over 2 years ago
    Thanks, Braiden! Any of the choices – including seller financing or hard money as you mentioned – can be good choices in the right situation. Good luck with your first deal!
    Corey Staples from Clovis, New Mexico
    Replied almost 3 years ago
    Great article. I appreciate you breaking everything down for newbs like myself. I just got pre-approved for a VA loan as I eye my first ever deal (duplex shopping), and articles like these are exactly what I need!
    Ephrem Bekere from Lancaster, Pennsylvania
    Replied over 2 years ago
    Hey Chad, great article! Really learned a lot from this. As a 21 year old looking at my options, financing seems to be my only hurdle. Thanks for sharing!
    Chad Carson Investor from Clemson, SC
    Replied over 2 years ago
    Thanks for reading and commenting, Ephrem! Yes, financing can certainly be a hurdle for a lot of people. I’m glad the article was helpful. Best of luck and keep plowing ahead!
    Ephrem Bekere from Lancaster, Pennsylvania
    Replied over 2 years ago
    Hey Chad, great article! Really learned a lot from this. As a 21 year old looking at my options, financing seems to be my only hurdle and this was definitely encouraging to read how you funded your first. Thanks for sharing!
    Andrew Syrios Residential Real Estate Investor from Kansas City, Missouri
    Replied over 2 years ago
    The first one is always the hardest, very good and comprehensive article!
    Daniel Pollock Real Estate Investor from Brooklyn, New York
    Replied over 2 years ago
    Thank you Chad, very clear and informative article, thank you for sharing your perspectives.
    Michael Dahlheim Investor from Cambridge, Minnesota
    Replied about 2 years ago
    This is a perfect article for everyone that is trying to figure out how to get started in real estate investing. I’ll suggest a follow up article (that is probably already written); when hard money, commercial, private, or other short term and balloon type loans are used to fund a purchase, what is done to get out of that loan in a few months or years?
    Nicholas Ziegler from San Antonio, Texas
    Replied about 2 years ago
    Great Article Chad, thanks for the help. My wife and I are in our mid 20’s and are looking for our first home. We want to house hack and live in one side of a duplex. It seems like an FHA loan is our best bet. We have about 3 grand saved and need to keep saving. My question is whats a good goal to save for before we start looking for a duplex. Obviously for the down payment and fees, but also for reserve cash? Any thoughts would be helpful. Thank you
    Chad Carson Investor from Clemson, SC
    Replied 5 months ago
    I know his is a late response, but I know other people will have the same question. For cash savings – I of course like to start with the down payment, which for FHA is 3.5%. You also need closing costs, which could be 1-3% of price as a rough estimate. And for reserves I like to start with 3 months of the properties total rent, but a minimum of $4,000-5,000. This gives me enough to help with a big ticket expense like HVAC, roof, etc. Good luck!
    Monique Rene Coates Consultant from Providence, RI
    Replied about 2 years ago
    Great article and it all makes quite a lot of good sense. Regardless of where one is in the investment life cycle, a down payment of some sort, and amount, will always be necessary, but perhaps not available. That is the biggest issue for real estate newbies at STEP #1 with limited financial resources and/or partners.
    Corey Ricks from Darby, Pennsylvania
    Replied almost 2 years ago
    Chad, thanks for posting this article. Your guide serves as an essential road map for the newbie getting their feet wet in real estate.
    Adam Horowitz Lender from Fort Lauderdale, FL
    Replied over 1 year ago
    Chad, I wanted to hear your thoughts on a new source of funding. A hybrid model that could be for your stage 3, 4 or 5 folks. Investors looking to fix and flip, wholesalers or birddogs that want to start investing in their own properties, people that want to buy or hold are some of the strategies this funding will work for. The long and short of the funding is $150k to $200k funding without collateral or income verification….only based on credit score. The funding starts out as lines of credit from the big banks you know and love, Chase, Citi, Bank of America, etc…but is converted into cash without fees…advantages are the quick turnaround for funding, 18 months of zero interest, and a way into investing for people that want to get started. Disadvantage is clear, after the 18 months, interest skyrockets..so investors need a strategy to payoff the balance before the 18 months…payoff from the flip, payoff from a HELOC and let the renter pay the HELOC.
    David Boley
    Replied over 1 year ago
    Exactly what I needed right now! Thanks for re-posting.
    Nicholas Wilson Rental Property Investor from Philadelphia, PA
    Replied over 1 year ago
    Chad, I found this article VERY helpful! My wife told me yesterday, “If you want to pursue another property, do the research, find a way and let’s discuss it “ (love her for that). This article gave me direction on what I need to do and look for so I can go back to my wife with a clear understanding and plan! I am transitioning from Stage 1 to Stage 2. We are closing on a triplex we purchased in Wilmington, DE that will allow us to house hack and lower our monthly expenses (stage 1). Now, I am looking for multi-unit properties that can serve as a tool to buy down personal debt (stage 2). We have found a few prospective properties that meet our niche (smal multi-unit rental properties that cash flow above $800) but are looking for the best way to finance since we just used an FHA loan. After reading your article, I think I am most interested in private money lending. I’ll be using the resources you provided to look into it more!
    Chad Carson Investor from Clemson, SC
    Replied 5 months ago
    Glad it was helpful, Nicholas! Your wife is a wise persona indeed if she recommends you do your research first. Good luck with that next deal and private financing. It’s been a great source of funds for me.
    Scott Rose from Kaneohe, HI
    Replied about 1 year ago
    Chad, Timeless article – glad it is still available. I got a lot out of how you broke down the stages – it pushed me to identify where I actually am instead of where I “think” I am. Definitely in Stage 1, but I’ve only just begun the education.
    Eric Carr Real Estate Broker from Los Angeles, CA
    Replied 7 months ago
    I love the open ended style. There are no one-ways, but several based on how others have and of course, the rules to the game
    Kathryn Rose
    Replied 6 months ago
    Thanks for the article! I’m getting ready to purchase my first “real” property after doing 2 live in Mobile-home flips and using the cash from the sale to move into stick-built housing. This will be my first financed purchase and I’m having some confusion about the best way to start. I hope to employ the BRRRR strategy if possible. With FHA, can you cash-out refinance if you improve the value after you move in? What about the 203k option and cash-out refinancing? I’m really hoping to find a small multi family to house-hack for the first couple of years, but don’t want to wait that long before acquiring the next property. Thanks!!
    Chad Carson Investor from Clemson, SC
    Replied 5 months ago
    Thanks for reading Kathryn! I’m pretty sure you can do a BRRRR to refinance out your FHA loan. There may be some seasoning requirements, but just ask your mortgage lender. I know the 203k loan is a good option for properties that need remodeling, but I haven’t used it personally. Typically on a BRRRR deal you start out with cash, private financing, or some type of short-term financing. Then you refinance with the FHA or conventional long-term mortgage. You can do the purchase and the refinance with FHA or conventional, but you’d probably need a 203k or other remodel loan. And it’s be a lot more hassle up front. good luck!
    Reese Hanson
    Replied about 2 months ago
    Hi I'm trying to put a little portfolio ( I guess you'd call it!) together and I'm trying to start with a Single Family, three bedroom one bath home in my area. I've done the math and with two rooms rented I'd pay for the house and land in three years. The market also where I'm at ia pretty decent, no hoodlums or trouble at night or anything like that.
    Reese Hanson
    Replied about 2 months ago
    I'm not able to finish college ( I've currently got 1 year to go for a Bachelor's) and since about 2015 I've been on SSI/disability for an incident that occurred, but I wanted to ask the GENERAL people is Real Estate a good way to go? The houses in my area are going for really cheap and the area doesn't have any crime or bad things happening at all. I have told everyone I know that I wanted to have a place to my name, like actually my name! After doing the numbers I'd be able to pay off the house and property in 3years time with the 2 rooms rented,5years with a 1 roommate ,9 years with just myself. Can someone that's done this type of investment talk to me please? Give me pointers/ advise?
    Alfred Johnson from Rocky Mount, NC
    Replied about 2 months ago
    Chad, many thanks for an article one can truly use as a newbie investor. While my credit rating isn't fair as of this writing, I'm looking to try a live in flip this year or the first quarter in 2020 as I look to see more clearly. I suspect I will need to go through a good broker here in North Carolina to find financing for a first time property buyer or FHA loan from my understanding of your informative article. Just wanted to thank you and wish you much continued success.