I’m missing something, right?

[Dominick Galinis]

Hey BP fam,

So, I'm in the home stretch to having the savings I want to get my first property. I'm going to be using a FHA loan for either a triplex or 4 plex.

I use Credit Karma to look at my credit score and they offer me personal loans through the app, usually for a stupid high rate (10%+).

now, for my question. I’m about to get my RE license. And the commission I would receive for representing myself would be more than enough to pay off that loan, and still have plenty left over. My family friend who’s been an agent for almost 2 decades is going to walk me through the “buying process” to make sure I’m protected on that side, and I know about it the area I’m buying in to make sure I’m getting a property  that will rent etc. 

I’ve heard of people getting private loans before, but never through one of those apps or whatever. And I’m concerned that I am missing something in my inexperience because it seems “obvious”, if that makes sense. Am I missing something here? Thank you all very much!

[Dominick Galinis]

Originally posted by @Scott Winter:

It sounds like you know to consider the impact a personal loan would have on your credit score and the increased debt to income and are now just considering technicalities with this approach.  

Like @Carini Rochester said, you need a lender to weigh in, so call a few lenders or banks.  Ask about their personal loan options as well as their mortgage loan options.  See how they suggest getting you pre-approved to buy property right now with the money you have and the price range you are looking at. Ask them if you can use a personal loan for the purchase of a property. 

If no road blocks, I'd say go for it!  From what I can tell, you're looking for a fairly small personal loan if you're going to be able to repay P&I with your commission.  If it is simply bridging you for a few months, the interest expense is negligible, but you get to buy right away so you can start right away.

 Thank you Scott. I appreciate that! I’m going to be making a few calls by the end of this week.

[Dominick Galinis]

Originally posted by @Steve Milford:

@Dominick Galinis I say go for it, related to paying yourself if you are licensed. I did it, lot's of people are naysayers. Plus whatever commission arrangement you work out is your own. If the co-agent gets .01%, and you get 99.99% of the commission, so be it lol. I think it is funny that everyone gets so worked up about it. In most states though, you can't receive funds as an agent unless you are licensed.

Now whether or not a bank will accept the other loan is a different story. Like others have suggested, just get the money and put it into the bank for vesting. Or just save for down and finance closing costs. Not a big deal.

 Same here with the agents needing to be licensed. So that’s definitely step 1 in this whole thing. I appreciate the input

[Dominick Galinis]

Originally posted by @Josue Vargas:

Originally posted by @Dominick Galinis:

@Jesus Roman

I appreciate that. Thank you for the input! 
 
I’m not getting my license for one deal. I do want to use it and be an agent as well: it just so happens that it currently coincides in timing. 

Go through the process, get your license and learn how to do business in Real Estate as an Agent before "representing yourself".  Know the state rules.  Too many things can go wrong, very wrong! Most states requires an agent to be sponsored by a broker, meaning the broker is the owner of the transaction, and therefore you are doing business on his/her behalf.  In this situation, after closing day, the broker has earned a commission in which he/she will eventually cut the check and pay your commission, even if its your "own deal".  No broker will sponsor you without a split on the earn commission of the deal, unless you absolutely know that is not the case. 

 Hey Josue,

I appreciate the feedback. The broker I’m hanging my license with doesn’t take commission for personal deals. And as for the “learning the business first” thing. If I’m destined to “mess up my first sale”, whether it be to myself or someone else, I’d rather it be with me. Because I would feel horrible doing that to someone else. But that’s why I’m having someone who’s experienced walk me through it so I don’t get worked over and lower the chances of anything “catastrophic” going wrong on that end of things

[Dominick Galinis]

Originally posted by @Dan Beaulieu:

@Dominick Galinis Dude. Please do not get a personal loan to invest in real estate. Any sort of consumer debt needs to be out of the picture.

It sounds like you may have fomo. Just remember that people have been investing in real estate the same way for over 100 years and it's not going anywhere. It's a long game. REI will still Be here for you when your personal finances are in order and you've saved up plenty of capital for your down payment and reserves.

 Hey Dan,

I’m not arguing or pushing back, but truly, I’m just curious and want to know why. If I can get a lender to agree and all of that works out, what’s the, “issue”, If that’s the right word, In getting the loan and paying it back within a month?  
and yes, FOMO is real lol

[Steve K.]

I would recommend sitting down with a few local lenders. You're going to want to build those relationships anyway as you start your career as an agent and as an investor. 

It's good that you're taking time to educate yourself on here first however as when you sit down with potential lenders, you should know that they generally will not allow any personal loans to be used as a down payment. They won't want any other lenders involved. From a lender's perspective, using a loan as the down payment defeats the purpose because they want you to have some of your own skin in the game. They will probably not lend money to you if you're having trouble coming up with the down payment. The personal loan could also actually work against you by hurting your debt service to income ratio (you'll need to start making principle and interest payments on it, and it will be high interest), hurting your credit score because the private lender will do a hard pull, and ultimately lowering the amount you'll be approved for/ hurting your chances of being approved at all. Lenders will also want to verify the source of the down payment funds and make sure they are "seasoned" for a few months in your account. If you're switching careers to become an agent, they'll want to see 2 years of consistent commission income in addition to seasoned down payment funds. 

Again, to recap, I'd recommend contacting some lenders to start building those relationships. There are probably ways you can use a loan for a down payment but it's generally frowned upon, more expensive in the end and higher risk than using something like an FHA loan or a legit down payment assistance program. A good local lender will help you determine the best options for your personal situation and coach you on ways to get approved as quickly as possible on the up and up.

If qualifying for a conventional loan is too far out for you, and you've identified a great deal that you can lock up with a contract in the meantime, then partnering with someone who has the money or using a hard money lender are other options to explore. 

[Tim Swierczek]

@Dominick Galinis Unsecured funds are NOT ALLOWED to be used in a loan transaction. They are against every "residential" loan guideline. Just in case someone comments to the contrary they are not against commercial loan guidelines, but that is not what you want (20%+ down and must be non-owner occupied). Others will also possibly suggest a loophole that exists, which entails borrowing the money unsecured, depositing it, and then waiting two months before applying. These are true, but what is not true is that you get an unsecured loan that will allow you to buy today. Since you mentioned FHA, I'll post their guidelines but conventional, VA, and USDA all restrict what you are considering.

See the screenshot below.  Note, there is a difference in the PDF pages vs the page of the guideline.  I've included the link for any doubters.  The bottom line is, you can use this method but not as you are anticipating, so yes you are missing something.  Glad I could help.

https://www.hud.gov/sites/dfil...

[Will Barnard]

Quote from @Dominick Galinis:

@Jonathan Greene

easy there man. You’re making a lot of assumptions without the full details, or details that you seemingly misunderstood. 
I can save up for the property and have the income and most of the money now. I’m just trying to expedite the process by getting a loan elsewhere. 
But since you wanted to bring up “only thinking about myself,” I offered to pay him, let him get the commission, etc. but since my family has helped him immensely in the past, he offered to help me for free to show appreciation for that and for them always being there for him. You don’t have to get so wound up about something you know nothing about. And I never said I was ready to handle my own deal, that’s why help is involved. Just like help would be involved on my first deal selling a house to (fill in random persons name here). 

I think you are taking the comments to personally and getting defensive. The entirety of Jonathan's comments were based on the info you originally provided. So your friend feels he owes your family and this is how he can repay. Fine, but that info was not given and the advice was a warning, not just to you, but to all reading this. David is experienced and knowledgeable and your defensiveness back is not helping you or anyone else. Take stock into what he is saying, he is 100% hitting the nail on the head here with no intent to belittle you.

I believe twice in this thread, you admitted that you are impatient and want it now rather than waiting. This speaks volumes to your inexperience and what would most likely be a big mistake in the end. Rushing in is not a good plan. Rethink it, educate yourself in the market, the numbers, the transactions (purchase docs, title docs, insurance docs, due diligence, etc) and ensure you have a viable plan in which you are prepared to properly and efficiently execute. There is great risk in overleveraging your asset.

[Dominick Galinis]

Originally posted by @Will Barnard:

Quote from @Dominick Galinis:

@Jonathan Greene

easy there man. You’re making a lot of assumptions without the full details, or details that you seemingly misunderstood. 
I can save up for the property and have the income and most of the money now. I’m just trying to expedite the process by getting a loan elsewhere. 
But since you wanted to bring up “only thinking about myself,” I offered to pay him, let him get the commission, etc. but since my family has helped him immensely in the past, he offered to help me for free to show appreciation for that and for them always being there for him. You don’t have to get so wound up about something you know nothing about. And I never said I was ready to handle my own deal, that’s why help is involved. Just like help would be involved on my first deal selling a house to (fill in random persons name here). 

I think you are taking the comments to personally and getting defensive. The entirety of Jonathan's comments were based on the info you originally provided. So your friend feels he owes your family and this is how he can repay. Fine, but that info was not given and the advice was a warning, not just to you, but to all reading this. David is experienced and knowledgeable and your defensiveness back is not helping you or anyone else. Take stock into what he is saying, he is 100% hitting the nail on the head here with no intent to belittle you.

I believe twice in this thread, you admitted that you are impatient and want it now rather than waiting. This speaks volumes to your inexperience and what would most likely be a big mistake in the end. Rushing in is not a good plan. Rethink it, educate yourself in the market, the numbers, the transactions (purchase docs, title docs, insurance docs, due diligence, etc) and ensure you have a viable plan in which you are prepared to properly and efficiently execute. There is great risk in overleveraging your asset.

So, a few things I think you’re off on: being told “you’re only thinking of yourself,” is a personal attack, and belittling. I’m not quite sure how one can spin “you’re being selfish” into not belittling.  Especially with not having the full info. And the proper thing to do here if something seems off would be to ask, not trying to say something about someone’s character. Hence why if you looked at all my other responses to everyone else, it was a different response. Also, I never said I was getting a loan for 10% down. I said the rates were 10%+, hence my saying “I don’t think you’re truly understanding what I’m saying.” Why trust advice from someone who clearly misunderstood? That doesn’t make any sense, either. 

 Now, for what you were saying specifically. My wanting it now isn’t a knowledge question of “do these numbers work? Will this rent? Etc” I have those answers (as said in my original post), it’s around “can I expedite getting my down payment to purchase my property using this method?” (Also said in my original post.)      So, I’m not quite sure where all of that came from in your post. 

To put it simply, my question was this, can I use a personal loan (from ANY source) to help with a down payment? That’s it.

[Account Closed]

@Dominick Galinis

Almost certainly, no

[Jonathan Greene]

@Dominick Galinis you've shown throughout this whole thread exactly how and why you are going to tank your first deal. You are impatient and oversensitive and real estate investing eats that for dinner. Saying you are being selfish was based on exactly what you wrote in the top post. Based on that it was a keen observation. I am not here to bring you cookies and give you a warm glass of milk just because you prefer an echo chamber for your ideas. Look at my votes vs. posts and look at @Will Barnard. No one is trying to attack you, it's good advice. It's no one's fault that we can't read your mind or between the lines and when most people get defensive in here it's usually because we hit the nail on the head. Best of luck.

[Dominick Galinis]

Originally posted by @Jonathan Greene:

@Dominick Galinis you've shown throughout this whole thread exactly how and why you are going to tank your first deal. You are impatient and oversensitive and real estate investing eats that for dinner. Saying you are being selfish was based on exactly what you wrote in the top post. Based on that it was a keen observation. I am not here to bring you cookies and give you a warm glass of milk just because you prefer an echo chamber for your ideas. Look at my votes vs. posts and look at @Will Barnard. No one is trying to attack you, it's good advice. It's no one's fault that we can't read your mind or between the lines and when most people get defensive in here it's usually because we hit the nail on the head. Best of luck.

You just can’t go without making assumptions, can you? Because I didn’t agree with you, you’re back to lobbying personal insults and making wrong assumptions. 

Let me educate you a bit, there’s a thing called environment leading to expectations.  People come to BP to ask questions, not to be taunted, made fun of, etc. so a persons response to those things here is different than out in the world where it’s to be expected. 

And no, it’s noones fault they can’t read my mind. But it IS their fault for making wrong assumptions, then doubling down on it when they were given the whole story.

And I gotta say, flexing upvotes on a forum certainly is interesting. Next you going to tell me how much karma you have on Reddit? Nobody cares man.

[Marian Huish]

wow @Dominick Galinis-  You've received a lot of good advice from experienced agents and investors who've directly answered your question.  You clearly do not like the answers-  best of luck.

[Luka Milicevic]

I’m on credit Karma as well, and the other day I took a screen shot of the loan offers I was getting pitched so I could show my friends the interest rates. I sent the screen shot with the caption… “check these interest rates. I can’t believe there are people out there that actually take out these loans”

In addition, my I love debt score is over 800 so my interest rate is on the low end.

My advice is avoid those loans. It sounds like you don’t need it

[Jonathan Greene]

@Dominick Galinis all you are doing is proving my point every time. If you think these responses are taunting and lobbing personal insults, I really shutter at how you will do as an investor. If you think this is harsh, I'd like to introduce to the real estate investing world which does not care about your feelings as a whole. Most of us are here to help. Just because I don't wrap my comments up in a soft pillow for you to lay your head on does not make them wrong or mean. You came here asking for advice. Every single person who doesn't give you what you want, you go back on. It's actually embarrassing. You want an echo chamber and you basically said you know nothing up top, but then keep pontificating about what you know. It's quite confusing. And if you think referring you to the upvotes was a flex, it was not. It's a metric that can show you on BP who adds the most value. If someone has more upvotes than posts that inherently means they provide more than 1 to 1 value. I really look forward to hearing more about your real estate investing journey as it takes off.

[Dominick Galinis]

@Jonathan Greene

so, me “proving your point” is going back at you for being a jerk? And are trying to claim a moral high ground because you don’t like people going back at you. Might I suggest growing up a bit. If you actually paid attention, there was quite a few people who said it wasn’t a good idea pin this thread that I responded to. All with acceptance, and trying to seek understanding. But I get it, when your identity is wrapped up in your rank on a forum, nothing else matters but you. And do you truly believe that someone upvoting a post provides them value? That’s kind of an alarming way to look at the world.