{"id":80649,"date":"2019-04-21T05:00:42","date_gmt":"2019-04-21T11:00:42","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=80649"},"modified":"2023-09-25T15:26:04","modified_gmt":"2023-09-25T21:26:04","slug":"finance-your-first-deal","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/finance-your-first-deal","title":{"rendered":"The Comprehensive Guide for Financing Your Very First Real Estate Deal"},"content":{"rendered":"\n\n      <iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm?e=BIGPOC4871045575&#038;light=false\" width=\"100%\"><\/iframe>  \n\n\n\n\n<p><span style=\"font-weight: 400;\">Are you someone who wants to buy investment property, but you just can\u2019t figure out how to finance your first buy?&nbsp;&nbsp;<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">What follows are seven different ways to finance your first property. Before that, I\u2019ll also share ideas to make sure this first purchase fits into your overall wealth building strategy so that you don\u2019t waste time going down the wrong paths.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">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. <\/span><\/p>\n\n\n\n<p>I remember very well&nbsp;being&nbsp;a 23-year-old standing at the edge of my new venture into real estate, asking questions like:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-weight: 400;\">\u201cHow am I going to do this?\u201d &nbsp;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400;\">\u201cHow will I raise the money for my deals and <a href=\"https:\/\/www.biggerpockets.com\/loans?utm_source=blog&amp;utm_medium=blog-ad\" class=\"rank-math-link\" target=\"_blank\">get a loan<\/a>?\u201d<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400;\">\u201cWill the lessons I\u2019ve learned actually work for me?\u201d<\/span><\/li>\n<\/ul>\n\n\n\n<p><span style=\"font-weight: 400;\">It\u2019s 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.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">I\u2019m going to give you my best in the knowledge department right here, and you\u2019ll have to do your part by taking action on what you learn.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">Is that a fair deal?<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">Now, let\u2019s move on to financing your first real estate investment!<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Strategy Before Details: 5 Stages of Building Wealth<\/h2>\n\n\n\n<p><span style=\"font-weight: 400;\">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!<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">Here\u2019s the big picture of wealth building as I see it.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">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 <a href=\"\/renewsblog\/2016\/03\/28\/financial-freedom\/\" target=\"_blank\" rel=\"noopener noreferrer\">financial independence<\/a>, retirement, freedom, or whatever you want. It\u2019s the peak of the mountain on your wealth building journey. <\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">To reach this financial peak, you have to build a large net worth (aka equity) so that you can eventually live off of the income from your investments and never have to trade hours for dollars again.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">But before you reach that final stage, there are other milestones you\u2019ll 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.<\/span><br \/><em><br \/><strong>Related:<\/strong> <a href=\"\/renewsblog\/2015\/05\/26\/real-estate-financing\/\" target=\"_blank\" rel=\"noopener noreferrer\">Real Estate Financing: The 4 Best Ways Savvy Investors Fund Deals<\/a><\/em><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">Here are five stages you\u2019ll pass during your climb:<\/span><\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><b>Survival<\/b><span style=\"font-weight: 400;\"> is the milestone when you\u2019re earning some money and getting your bills paid. It\u2019s also the place where you\u2019re digging yourself back out of financial holes you dug in the past. <\/span><\/li>\n\n\n\n<li><b>Stability<\/b><span style=\"font-weight: 400;\"> is like <\/span><a rel=\"noopener noreferrer\" href=\"https:\/\/www.daveramsey.com\/baby-steps\/\" target=\"_blank\"><span style=\"font-weight: 400;\">Dave Ramsey\u2019s first three baby steps<\/span><\/a><span style=\"font-weight: 400;\">. 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. <\/span><\/li>\n\n\n\n<li><b>Saver<\/b><span style=\"font-weight: 400;\"> is the stage where you realize the importance of your savings rate and put it into practice. Building wealth is actually simple, but it\u2019s 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. <\/span><\/li>\n\n\n\n<li><b>Growth<\/b><span style=\"font-weight: 400;\"> stage is where most of us think of investing. It\u2019s 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.<\/span><\/li>\n\n\n\n<li><b>Income<\/b><span style=\"font-weight: 400;\"> stage is when you already have a large chunk of equity and you\u2019re 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.<\/span><\/li>\n<\/ol>\n\n\n\n<p><span style=\"font-weight: 400;\">Which of the five wealth building stages above best describes you? Are you in survival, stability, saving, growth, or income modes? <\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">Don\u2019t beat yourself up wherever you are. Everyone has to climb the same mountain, and the fact that you\u2019re doing it now is all that matters. <\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">Once you know your stage, it will help you begin focusing on a real estate investment strategy. \u00a0<\/span><\/p>\n\n\n\n\n\n\n  <div class=\"lg:block\" x-data=\"{ ad_block_block_6511fa1a4f90b: popAds(1) }\">\n      <template x-for=\"ad in ad_block_block_6511fa1a4f90b\">\n        <a\n          :href=\"ad.linkURL\"\n          class=\"no-underline text-black\"\n          x-on:click=\"adClicked('https:\/\/www.biggerpockets.com\/blog\/finance-your-first-deal', ad.sponsor, ad.title, ad.id, 'blockAdClicked', 'blockAd', '')\"\n          target=\"_blank\">\n          <div\n            class=\"py-4 border-b flex flex-col flex-nowrap text-sm border-t px-0 rounded-none\"\n            x-init=\"\n              analytics.track('blockAdLoaded', {\n                referrer: 'https:\/\/www.biggerpockets.com\/blog\/finance-your-first-deal',\n                sponsor: ad.sponsor,\n                ad_title: ad.title,\n                ad_page_location: ''\n              })\n            \"\n            x-intersect:enter.once=\"adViewed('https:\/\/www.biggerpockets.com\/blog\/finance-your-first-deal', ad.sponsor, ad.title, ad.id, 'blockAdViewed', 'blockAd', '')\">\n            <div><span class=\"text-xs text-slate-light block bg-slate-50 p-1 inline-block rounded-md\">Sponsored<\/span><\/div>\n            <div class=\"flex items-center text-sm space-x-4\">\n                <img :src=\"ad.imageURL\" :alt=\"ad.imageAlt\" class=\"h-10 w-10 object-cover rounded-full\">\n\n                <div clas=\"text-sm\">\n                    <span class=\"font-bold block\" x-text=\"ad.sponsor\"><\/span>\n                    <span class=\"text-slate\/80\" x-text=\"ad.description\"><\/span>\n                <\/div>\n            <\/div>\n\n            <div>\n                <span class=\"font-bold\" x-text=\"ad.title\"><\/span>\n                <p class=\"mt-2 text-slate\/80\" x-text=\"ad.body\"><\/p>\n                <span class=\"mt-2 text-themeBlue block mt-2 underline\" x-text=\"ad.linkTitle\"><\/span>\n            <\/div>\n          <\/div>\n        <\/a>\n      <\/template>\n  <\/div>\n\n\n\n\n<h2 class=\"wp-block-heading\">Choose a Strategy Before Your Financing<\/h2>\n\n\n\n<p><span style=\"font-weight: 400;\">Your real estate investment strategy and your financing are closely connected. You\u2019ll be in trouble if you just walk into a bank and say, \u201cI want a loan so I can buy investment real estate.\u201d <\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">A strategy is your decision about which part of the real estate universe will best help accomplish your financial goals <\/span><i><span style=\"font-weight: 400;\">right now<\/span><\/i><span style=\"font-weight: 400;\">. You can invest in <a href=\"\/renewsblog\/2014\/01\/07\/flipping-houses\/\" target=\"_blank\">fix and flips<\/a>, <a href=\"\/renewsblog\/2013\/11\/02\/hack-housing-get-paid-live-free\/\" target=\"_blank\">house hacks<\/a>, mobile homes, commercial buildings, private notes, and much more. But you can\u2019t do them all at the same time on your first deal.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">So, a strategy is about focus. It will help you get the right financing on your first deal. &nbsp;<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">If you\u2019re working on wealth stages #1 or #2\u2014survival or stability\u2014keep 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. &nbsp;<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">I wrote in more depth about <\/span><a href=\"\/renewsblog\/2016\/01\/13\/wholesaling7-paths-instead\/\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">seven ways (other than wholesaling) to make money in real estate<\/span><\/a><span style=\"font-weight: 400;\"> as a newbie. Most of these don\u2019t actually include <\/span><i><span style=\"font-weight: 400;\">you<\/span><\/i><span style=\"font-weight: 400;\"> borrowing the money because other people will buy your deals, but you\u2019ll learn a lot about financing in the process. <\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">If you\u2019re 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\u2019s bad that real estate is illiquid or hard to sell. I say it\u2019s GOOD. You\u2019re forced to leave it there and not spend it!<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">If you\u2019re in this stage, a great place to start is with <\/span><span style=\"font-weight: 400;\">house hacking<\/span><span style=\"font-weight: 400;\"> or <\/span><span style=\"font-weight: 400;\">live-in flips<\/span><span style=\"font-weight: 400;\">. 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\u2019ll explain more later, allow you to get into properties with less down payment. <\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">You could also get into house flipping and rental properties at this stage, but because you lack sufficient savings, you\u2019ll need to leverage the down payment and reserve money of partners or private investors. This is exactly what I did early on.<\/span><\/p>\n\n\n\n<p><em><strong>Related:<\/strong> <a href=\"\/renewsblog\/2015\/07\/13\/focus-on-first-deal\/\" target=\"_blank\" rel=\"noopener noreferrer\">Newbies: You Should Focus on Your First Deal And Nothing Else. Here\u2019s Why.<\/a><\/em><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">If you\u2019re 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.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">In the section below, I\u2019ll share some basic ideas for how to finance your real estate with any of these strategies. <\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">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\u2019m guessing if you\u2019re in this stage you\u2019ve already figured out most of the ideas I\u2019m sharing here. <\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">So, you\u2019ve got your stage in mind, right? You have a basic idea of your strategy, and you\u2019re ready to get started.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">Now let\u2019s begin unpacking the different possibilities to finance your first investment property.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">7 Types of Financing for Your First Investment Property<\/h2>\n\n\n\n<p><span style=\"font-weight: 400;\">Below are seven solid types of financing for your first investment property. For each financing type, I will tell you:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-weight: 400;\">What it is<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400;\">The good<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400;\">The bad<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400;\">Who can use it (i.e. owner occupied, non-owner occupied, 1-4 units, or any property)<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400;\">Possible investment strategies with this financing type (i.e. house hacking, live-in flips, rentals, etc.)<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400;\">Where to find this financing<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400;\">Further reading for you to learn even more<\/span><\/li>\n<\/ul>\n\n\n\n<p><span style=\"font-weight: 400;\">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 <\/span><a href=\"https:\/\/www.biggerpockets.com\/forums\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">BiggerPockets Forums<\/span><\/a><span style=\"font-weight: 400;\">. That focus will help you become more competent and confident as you work on your first deal.<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">1. FHA (Federal Housing Administration) Loans<\/h3>\n\n\n\n<p><em><b>What it is: <\/b><\/em><span style=\"font-weight: 400;\">These federally subsidized loans generally have lower down payment requirements (4.91% as of April 2019<\/span><span style=\"font-weight: 400;\">) and easier qualifying standards than other loans. They also have low, fixed interest rates for 30 years.<\/span><\/p>\n\n\n\n<p><b><em>The good:<\/em> <span style=\"font-weight: 400;\">Easier to qualify, attractive terms.<\/span><\/b><\/p>\n\n\n\n<p><em><strong>The bad:<\/strong><\/em>&nbsp;F<span style=\"font-weight: 400;\">ees can be higher than other programs, the closing process is not fast &#8212; typically limited to one deal at a time, major fixer properties won\u2019t qualify.<\/span><\/p>\n\n\n\n<p><em><b>Who can use it: <\/b><\/em><span style=\"font-weight: 400;\">Owner-occupied only.<\/span><\/p>\n\n\n\n<p><b><em>Investment strategy:<\/em> <\/b><span style=\"font-weight: 400;\">Good for house hacking or live-in flips, 1-4 units only.<\/span><\/p>\n\n\n\n<p><em><b>Where to find it: <\/b><\/em><span style=\"font-weight: 400;\">Mortgage departments at banks, mortgage brokers, credit unions, large mortgage lenders.<\/span><\/p>\n\n\n\n<p><em><b>Further reading: <\/b><\/em><span style=\"font-weight: 400;\">Check out <\/span><a href=\"\/renewsblog\/2015\/03\/25\/fha-financed-duplex-ideal-first-investment-property\/\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">this article on buying a duplex with an FHA loan<\/span><\/a><span style=\"font-weight: 400;\"> to learn more details about this program.<\/span><\/p>\n\n\n\n<figure class=\"wp-block-image\"><img loading=\"lazy\" decoding=\"async\" width=\"702\" height=\"336\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2016\/08\/wholesale-contract.jpg\" alt=\"wholesale-contract\" class=\"wp-image-79518\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2016\/08\/wholesale-contract.jpg 702w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2016\/08\/wholesale-contract-300x144.jpg 300w\" sizes=\"auto, (max-width: 702px) 100vw, 702px\" \/><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\">2. VA (Veterans Administration) Loans<\/h3>\n\n\n\n<p><b><em>What it is:<\/em> <\/b><span style=\"font-weight: 400;\">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. <\/span><\/p>\n\n\n\n<p><b><em>The good:<\/em> <span style=\"font-weight: 400;\">Easier to qualify, attractive terms, multiple loans are possible.<\/span><\/b><\/p>\n\n\n\n<p><em><strong>The bad:<\/strong><\/em> <span style=\"font-weight: 400;\">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\u2019t qualify.<\/span><\/p>\n\n\n\n<p><em><b>Who can use it<\/b><\/em><span style=\"font-weight: 400;\"><em>:<\/em> Owner-occupied only.<\/span><\/p>\n\n\n\n<p><em><b>Investment strategy: <\/b><\/em><span style=\"font-weight: 400;\">Good for house hacking or live-in flips, 1-4 units only.<\/span><\/p>\n\n\n\n<p><b><em>Where to find it:<\/em> <\/b><span style=\"font-weight: 400;\">Mortgage departments at banks, mortgage brokers, credit unions, large mortgage lenders.<\/span><\/p>\n\n\n\n<p><em><b>Further reading: <\/b><\/em><span style=\"font-weight: 400;\">For more details on VA loans and using them to buy investment properties, read <\/span><a href=\"\/renewsblog\/2015\/12\/01\/va-loan-real-estate\/\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">VA Loan: The Real Estate Investor\u2019s Guide to Eligibility and Funding<\/span><\/a><span style=\"font-weight: 400;\">. <\/span><\/p>\n\n\n\n<p><em><strong>Related:<\/strong> <a href=\"\/renewsblog\/2014\/11\/29\/get-loan-approved\/\" target=\"_blank\" rel=\"noopener noreferrer\">Confessions of an Ex-Banker: How to Get Your Next Loan Approved, Guaranteed.<\/a><\/em><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">3. Conforming Loans<\/h3>\n\n\n\n<p><span style=\"font-weight: 400;\"><em><b>What it is:<\/b><\/em> 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. <\/span><\/p>\n\n\n\n<p><em><b>The good: <\/b><\/em><span style=\"font-weight: 400;\">Attractive terms with low interest over 15-30 years, faster qualifying than FHA\/VA.<\/span><\/p>\n\n\n\n<p><b><em>The bad:<\/em> <span style=\"font-weight: 400;\">Larger down payment than FHA or VA, limited to 4-10 loans; major fixer properties won\u2019t qualify.<\/span><\/b><\/p>\n\n\n\n<p><em><b>Who can use it: <\/b><\/em><span style=\"font-weight: 400;\">Owner-occupied OR non-owner occupied. Non-owner occupied typically requires more money down, higher interest rates, and other more stringent requirements. <\/span><\/p>\n\n\n\n<p><em><b>Investment strategy:<\/b><\/em><span style=\"font-weight: 400;\"> House hacking, live-in flips, rental real estate; 1-4 units only.<\/span><\/p>\n\n\n\n<p><b><em>Where to find it:<\/em> <\/b><span style=\"font-weight: 400;\">Mortgage departments at banks, mortgage brokers, credit unions, large mortgage lenders.<\/span><\/p>\n\n\n\n<p><em><b>Further reading: <\/b><\/em><span style=\"font-weight: 400;\">Read <\/span><a href=\"\/renewsblog\/2016\/02\/21\/investors-guide-qualifying-conventional-loan\/\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">this BiggerPockets article<\/span><\/a><span style=\"font-weight: 400;\"> to learn more about qualifying for a conforming loan. Also, check out <\/span><a href=\"https:\/\/www.fanniemae.com\/content\/eligibility_information\/eligibility-matrix.pdf\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">the Eligibility Matrix<\/span><\/a><span style=\"font-weight: 400;\"> put out by Fannie Mae to describe their requirements for borrowers.<\/span><\/p>\n\n\n\n<figure class=\"wp-block-image\"><img loading=\"lazy\" decoding=\"async\" width=\"702\" height=\"336\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2016\/08\/find-a-mentor.jpg\" alt=\"find-a-mentor\" class=\"wp-image-79455\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2016\/08\/find-a-mentor.jpg 702w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2016\/08\/find-a-mentor-300x144.jpg 300w\" sizes=\"auto, (max-width: 702px) 100vw, 702px\" \/><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\">4. Portfolio Loans<\/h3>\n\n\n\n<p><em><b>What it is: <\/b><\/em><span style=\"font-weight: 400;\">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.<\/span><\/p>\n\n\n\n<p><em><b>The good: <\/b><\/em><span style=\"font-weight: 400;\">More flexibility, potentially larger number of loans than conforming, possible to get loans on fixer-uppers and commercial.<\/span><\/p>\n\n\n\n<p><em><b>The bad: <\/b><\/em><span style=\"font-weight: 400;\">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.<\/span><\/p>\n\n\n\n<p><em><b>Who can use it<\/b><\/em><span style=\"font-weight: 400;\"><em>:<\/em> Owner-occupied or non-owner occupied; 1-4 units, multi-units, commercial.<\/span><\/p>\n\n\n\n<p><b><em>Investment strategy:<\/em> <\/b><span style=\"font-weight: 400;\">House hacking, live-in flips, rentals, fix-and-flips.<\/span><\/p>\n\n\n\n<p><em><b>Where to find it: <\/b><\/em><span style=\"font-weight: 400;\">Banks (especially local ones), savings and loans, credit unions.<\/span><\/p>\n\n\n\n<p><em><b>Further reading: <\/b><\/em><span style=\"font-weight: 400;\">Brandon Turner wrote a good article about <\/span><a href=\"\/renewsblog\/2015\/04\/06\/portfolio-lender-loan\/\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">how portfolio loans transformed his business<\/span><\/a><span style=\"font-weight: 400;\">.&nbsp;<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">5. Hard Money Loans<\/h3>\n\n\n\n<p><b><em>What it is:<\/em> <\/b><span style=\"font-weight: 400;\">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. <\/span><\/p>\n\n\n\n<p><b><em>The good:<\/em> <\/b><span style=\"font-weight: 400;\">Fixer-uppers are OK, technically no limit to number of deals, can often borrow all or part of repair costs.<\/span><\/p>\n\n\n\n<p><em><b>The bad: <\/b><\/em><span style=\"font-weight: 400;\">High interest rates and other costs, may not loan to brand new investor who has no experience with real estate, typically short-term loans.<\/span><\/p>\n\n\n\n<p><em><b>Who can use it<\/b><\/em><span style=\"font-weight: 400;\"><em>:<\/em> Non-owner occupied; 1-4 units, multi-units, commercial, land.<\/span><\/p>\n\n\n\n<p><em><b>Investment strategy: <\/b><\/em><span style=\"font-weight: 400;\">Fix-and-flip, rental property (for purchase, will need to refinance).<\/span><\/p>\n\n\n\n<p><em><b>Where to find it: <\/b><\/em><span style=\"font-weight: 400;\">BiggerPockets has a <\/span><a href=\"https:\/\/www.biggerpockets.com\/hardmoneylenders\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">hard money lender directory<\/span><\/a><span style=\"font-weight: 400;\">. You can also usually find several lenders at your <\/span><span style=\"font-weight: 400;\">local real estate investor association<\/span><span style=\"font-weight: 400;\">. <\/span><\/p>\n\n\n\n<p><em><b>Further reading: <\/b><\/em><span style=\"font-weight: 400;\">BP founder Joshua Dorkin wrote <\/span><a href=\"\/renewsblog\/2006\/12\/08\/what-does-everyone-mean-by-hard-money\/\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">a good overview of hard money loans<\/span><\/a>, and t<span style=\"font-weight: 400;\">his article provides helpful info, as well: \u201c<\/span><a href=\"\/renewsblog\/2014\/06\/29\/8-things-real-estate-experts-wont-tell-hard-money\/\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">8 Things the Experts Won\u2019t Tell You About Hard Money.<\/span><\/a><span style=\"font-weight: 400;\">\u201d<\/span><\/p>\n\n\n\n<p><em><strong>Related: <\/strong><a href=\"\/renewsblog\/find-private-money-lenders\" target=\"_blank\" rel=\"noopener noreferrer\">How I Find Private Money Lenders to 100% Fund My Deals (&amp; How You Can, Too)<\/a><\/em><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">6. Private Money Loans<\/h3>\n\n\n\n<p><span style=\"font-weight: 400;\"><em><b>What it is:&nbsp;<\/b><\/em>Private money lenders are individuals or their self-directed IRA accounts who make loans against real estate. Unlike hard money lenders, these individuals aren\u2019t usually in the business of lending. <\/span><\/p>\n\n\n\n<p><em><b>The good: <\/b><\/em><span style=\"font-weight: 400;\">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.<\/span><\/p>\n\n\n\n<p><em><b>The bad: <\/b><\/em><span style=\"font-weight: 400;\">You can\u2019t walk into a bank and ask for private money. It\u2019s usually a result of relationships with other local investors built over time. Because these investors aren\u2019t in the business, there is usually a limit to the number of loans based upon their available funds. <\/span><\/p>\n\n\n\n<p><em><b>Who can use it<\/b><\/em><span style=\"font-weight: 400;\"><em>:<\/em> Non-owner occupied; 1-4 units, multi-units, commercial.<\/span><\/p>\n\n\n\n<p><em><b>Investment strategy: <\/b><\/em><span style=\"font-weight: 400;\">Fix and flip, rental property.<\/span><\/p>\n\n\n\n<p><em><b>Where to find it: <\/b><\/em><span style=\"font-weight: 400;\">Networking online (like<\/span><a href=\"https:\/\/www.biggerpockets.com\/forums\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\"> BP Forums<\/span><\/a><span style=\"font-weight: 400;\"> or <\/span><a href=\"https:\/\/www.biggerpockets.com\/forums\/517-real-estate-marketplace\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">Marketplace<\/span><\/a><span style=\"font-weight: 400;\">) or at <\/span><span style=\"font-weight: 400;\">local real estate associations<\/span><span style=\"font-weight: 400;\"> or business meetups.<\/span><\/p>\n\n\n\n<p><em><b>Further reading: <\/b><\/em><span style=\"font-weight: 400;\">This area of financing is my expertise. I&#8217;ve written at length about <\/span><a href=\"\/renewsblog\/creative-financing\/\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">multiple sources of private money<\/span><\/a><span style=\"font-weight: 400;\">. <\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">7. Seller Financing<\/h3>\n\n\n\n<p><em><b>What it is: <\/b><\/em><span style=\"font-weight: 400;\">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. <\/span><\/p>\n\n\n\n<p><em><b>The good: <\/b><\/em><span style=\"font-weight: 400;\">Typically great interest rate and terms, small down payment is possible, no credit or formal approval process.<\/span><\/p>\n\n\n\n<p><em><b>The bad: <\/b><\/em><span style=\"font-weight: 400;\">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.<\/span><\/p>\n\n\n\n<p><em><b>Who can use it<\/b><\/em><span style=\"font-weight: 400;\"><em>:<\/em> Owner-occupied or non-owner occupied; any type of real estate.<\/span><\/p>\n\n\n\n<p><em><b>Investment strategy: <\/b><\/em><span style=\"font-weight: 400;\">Best for rental property or house hacks; also works occasionally for fix and flips or live-in flips.<\/span><\/p>\n\n\n\n<p><em><b>Where to find it: <\/b><\/em><span style=\"font-weight: 400;\">Direct mail campaigns and other ways to generate leads directly from potential sellers; also possible through knowledgeable real estate brokers.<\/span><\/p>\n\n\n\n<p><b>Further reading: <\/b><span style=\"font-weight: 400;\">I wrote &#8220;<\/span><span style=\"font-weight: 400;\"><a href=\"\/renewsblog\/2014\/09\/17\/your-guide-to-uncovering-the-best-seller-financing-deals\/\" target=\"_blank\" rel=\"noopener noreferrer\">Your Guide to Uncovering the Best Seller Financing Deals<\/a>,&#8221;<\/span><span style=\"font-weight: 400;\"> and Brandon Turner wrote the &#8220;<\/span><a href=\"\/renewsblog\/2013\/11\/05\/seller-financing\/\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">Definitive Guide to Using Seller Financing to Buy Real Estate<\/span><\/a><span style=\"font-weight: 400;\">.&#8221;<\/span><\/p>\n\n\n\n<figure class=\"wp-block-image\"><img loading=\"lazy\" decoding=\"async\" width=\"701\" height=\"336\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2018\/08\/dd065ddf-c189-42e1-8f3b-6c763c47b825.jpg\" alt=\"dark curly haired pretty woman in glasses smiling outdoors\" class=\"wp-image-101417\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2018\/08\/dd065ddf-c189-42e1-8f3b-6c763c47b825.jpg 701w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2018\/08\/dd065ddf-c189-42e1-8f3b-6c763c47b825-300x144.jpg 300w\" sizes=\"auto, (max-width: 701px) 100vw, 701px\" \/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\">The Next Step Is the Most Important Step<\/h2>\n\n\n\n<p><span style=\"font-weight: 400;\">In this article, you\u2019ve learned about identifying your wealth building stage, focusing on a real estate strategy, and then choosing a financing source for your first deal.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">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\u2019t need to understand every single real estate strategy or financing source. You don\u2019t need to worry about how you\u2019ll do your second or third deals or how you\u2019ll become a millionaire. <\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">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.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">Remember how I started this article? I said I\u2019d share some information, and you\u2019d take action.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">It\u2019s time for the action. The real learning happens when you try to apply what you\u2019ve learned.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">Have fun and best of luck!<\/span><\/p>\n\n\n\n    \n  <div id=\"visibility-group-block_0851f0cdb4f42c0d07c6f1be1622c061\" class=\"visibility-group  hidden\">\n        \n\n<div id=\"hero-block_6aceb20a3c76f3171b53c6d54a989c78\" class=\"first:mt-0 hero-block py-4  alignwide   has-background has-theme-gold-light-background-color has-text-color has-theme-gold-color\">\n    <div\n        class=\" flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 w-full \">\n            <main class=\"py-4\">\n                \n\n<p class=\"has-theme-gold-color has-text-color has-large-font-size\" style=\"font-style:normal;font-weight:800\">Get the Best Loan Today<\/p>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-slate-900-color has-text-color\" style=\"font-size:16px\">Find trusted, <em><strong>investor-friendly<\/strong><\/em> lenders who specialize in your strategy. <\/p>\n\n\n\n<p><\/p>\n\n\n\n<div id=button-custom-event-block_f344542aad93c294359bfcd900a02f64 class='button-custom-event'>\n      <a href=\"https:\/\/www.biggerpockets.com\/business\/finder\/lenders\" x-on:click=\"window.analytics.track(&#039;Blog Block | B2C Marketplace Lender Finder&#039;, {\n      referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/finance-your-first-deal&#039;,\n    });\" class=\" btn-shape inline-block no-underline has-background has-theme-gold-background-color has-text-color has-white-color\" target=\"_blank\">Find a Lender<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n                <div class=\" first:mt-0 relative h-full lg:flex lg:items-center\">\n            <img decoding=\"async\" class=\"object-cover w-full relative z-20 my-0  rounded-md hidden lg:block\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/08\/Marketplace-Blog-Blocks-Lender-v3.png\" alt=\"investor friendly lender, investor friendly real estate loans\" title=\"\">\n        <\/div>\n            <\/div>\n<\/div>\n\n  <\/div>\n  \n\n\n<div class=\"wp-block-group\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n    \n  <div id=\"visibility-group-block_64dd31c79f00f\" class=\"visibility-group  \">\n        \n\n<div style=\"height:10px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div id=\"hero-block_64dd2875dba9d\" class=\"first:mt-0 hero-block py-4    has-background has-slate-100-background-color has-text-color has-theme-slate-color\">\n    <div\n        class=\" flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 w-full \">\n            <main class=\"py-4\">\n                \n\n<h3 class=\"wp-block-heading my-0 tracking-tight font-extrabold has-theme-slate-dark-color has-text-color has-large-font-size\">Join the community<\/h3>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-theme-slate-color has-text-color\" style=\"font-size:16px;font-style:normal;font-weight:400\">Ready to succeed in real estate investing? Create a free BiggerPockets account to learn about investment strategies; ask questions and get answers from our community of +2 million members; connect with investor-friendly agents; and so much more. <\/p>\n\n\n\n<div id=button-custom-event-block_64dd2888dba9e class='button-custom-event'>\n      <a href=\"https:\/\/www.biggerpockets.com\/signup\" x-on:click=\"window.analytics.track(&#039;Blog Block | Acquisition | Free Membership Signup&#039;, {\n      referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/finance-your-first-deal&#039;,\n    });\" class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\" target=\"_blank\">Sign Up<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n            <\/div>\n<\/div>\n\n\n<div style=\"height:10px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n  <\/div>\n  <\/div><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Are you someone who wants to buy investment property, but you just can\u2019t figure out how to finance your first buy? Here are seven different financing strategies and how to make sure your first purchase fits into your overall wealth-building plan so that you don\u2019t waste time going down the wrong paths.<\/p>\n","protected":false},"author":1679,"featured_media":90214,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5524,7119],"tags":[],"class_list":["post-80649","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-investing-for-beginners","category-biggerpockets-daily"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/80649","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/1679"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=80649"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/80649\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/90214"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=80649"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=80649"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=80649"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}