How much capital do you aim for when embarking anew?
When starting a new real estate project, how much seed capital do you prefer to save prior to carrying out concept, and why? Regarding the down payment, do you have a specific percentage you prefer for an unusual reason? I am seeking to broaden my perspective towards down payments and initial capital, having paid the 15-20% standard in most past deals.
Austin Soros
Hm. Depends on your strategy. If you are doing BRRRRs or flips then you need a lot more capital to purchase and rehab in cash. Although I would count hard money, private money and lines of credit as well as cash for these projects.
For turnkey properties, 20% DP with conventional loans is standard and required.
At a minimum you should have capital to cover the initial acquisition and rehab (if applicable), plus closing costs, plus $10k in cold hard cash extra for reserves.
At this point I try to have double that in total working capital. That way if I get into one deal I still have “dry powder” ready to take on another deal if one just pops up. I’m trying not to tie up everything all at once.
I would shoot for double your down payment. That way, you have enough if things begin spiraling, and you can get a good start on your project on your own terms.
I am sure @Kyle McCorkel said it best, those are great margins for all your needs on a given project. I prefer to put down 25%, or 5% more than the recommended down payment, as I have the seed capital available and like to distinguish myself from other investors.
I prefer to have as much capital ready as possible, but set a business plan and lock the value to match the plan. If you go over you have reserves, but you do not want to have to keep pulling willy nilly, as you will find yourself dry on seed capital in no time.
I like to keep enough seed capital available to bring my project almost to completion. This way, when I c=go the bank I can propose a project with a guaranteed return for a small loan. I get the money I need, the bank gets to contribute to a successful investment, and my lending history has never looked better.
I have always used the 20% deposit if buying, but I think seed capital is more than that. Seed Capital is also your initial starting capital to begin your flip or build.
@Account Closed I think that's a great strategy so long as you use the same financial institution over and over, building up a great relationship and reputation over time.