Eager to start investing, good credit

[Diara Campbell]

Hi, I am interested in starting my real estate journey. However, Just like most people I do have low funds for this type of endeavor. Yet, i know theres a way around this. I have been doing my own personal research on this matter and came across a few things; such as FHA loans, possibly leveraging my good credit score to get business credit and then use it as a down payment on a property, ofcourse hard money lenders, air bnb, and e.t.c... My question is what would be the best way to start out where i can obtain a multi family home with little to no money down and risk the chance of being in debt. Please help! Any advice would be greatly appreciated.

P.S i do work, but the funds i currently have just isnt enough.

[Robert Finn]

Congrats @Diara Campbell on embarking on your REI journey! I agree, starting with owner occupied small multifamily is a great way to get a hands on education. Look for opportunities to add value while living there. You'll also get a feel for being a landlord and have a criteria to go by when interviewing property managers when you scale. In my experience it's the most cost effective way to get started. Good Luck!

[Robert Reynolds]

Hi @Diara Campbell, 

I would recommend starting out with a condo, and house hacking it. They have a cheaper barrier to entry, can get a solid 3 bedroom condo for $400-600k in Los Angeles. Multi-Family will start at around $750k in Los Angeles, and it's also difficult finding a property with vacant units in move in ready condition. With a condo, you will have little cap ex, and other maintenance issues, as that will often be covered by an HOA.

As far as investing with low-no money down, I would recommend the FHA loan at 3.5% down payment and then try to have the seller cover your closing costs.

[Jim Pellerin]

Hey @Diara Campbell

Like most new investors, don't be in too much of a hurry to acquire or own real estate. This causes you to buy overleveraged using different financing strategies which allows low down-payment, fr example.

There are lots of income-generating real estate strategies you can use to build up your investment capital. I would also look at getting additional capital to allow you to purchase much larger properties.

[Reggie Nworie]

Hi @Diara Campbell, one of the more successful strategies I have seen is buying a 4-unit property and then living in one of the units. What happens is the other three units are effectively paying your mortgage and providing you with income. You can then later sell that property and use the proceeds to buy a larger property if you wish. That's just one example. There are many others. Another is you could do a BRRR with a no monthly payment program to really pour some gasoline on the income fire.

There are lots of ways to play the game to win, but I really think it starts with reserves. You will have to have cash on hand to invest in real estate. The amount of cash depends on the size of the deal. 

Yes, there are 100% financing options (my company does 100% financing in some cases, so I know it's real), but even in those cases, the investor needs to have some cash on reserves for emergency. The responsibility of maintaining the property still lies with the buyer / property owner at the end of the day and there will be an expectation to show that you can handle it. 

The reality is that with a good credit score, you can get pre-approved for an investment property loan in a matter of minutes. Even if you didn't have a job, the credit and/or DSCR is usually sufficient to get the green light. The loan approval is usually the easy part. The hard part is accumulating the cash reserves necessary to cover the down payment on a large multi-family property.

One piece of advice I would give would be to ensure you have enough in cash to cover one third of the purchase price. That is usually a good place to start. 

[Nicholas Coulter]

@Diara Campbell I would say a house hack! My wife and I did the same in Redlands CA and we got in for 5% down and have househacked the property and paid little or nothing on our mortgage. This has allowed us to get into a property search for something more expensive down in SD!

[Wale Lawal]

@Diara Campbell

In most cases, if not all, the cost to acquire an apartment building will be significantly higher than the cost to purchase a single-family home as an investment. A one-unit rental could cost an investor as little as $30,000 while the cost of a multi-family building can go well up in the millions.

At first sight, it might seem as though securing a loan for a single-family property would be a lot easier than trying to raise money for a million-dollar complex, but the truth is that a multi-family property is more likely to be approved by a bank for a loan than the average home.

That’s because multi-family real estate consistently generates a strong cash flow every month. This remains the case even if a property has a handful of vacancies or a couple of tenants who are late with their rent payments. If a tenant, for example, moves out of a single-family home, that property would become 100% vacant.

On the other hand, a ten-unit property with one vacancy would only be 10% unoccupied. As a result, the likelihood of a foreclosure on an apartment building is not as high as a single-family rental. All of this equates to a less risky investment for a lending institution and can also result in a more competitive interest rate for the property owner.

The Bottom line
Much like stocks, real estate investing allows for one to be successful through several different strategies. One of the most popular ways to invest in real estate is to own a collection of rental properties. Properties that only have one residential rental unit are commonly referred to as single-family properties, while apartment complexes that have multiple rental units are known as multi-family properties.

There are many advantages to owning multi-family real estate. These include access to easier and better financing opportunities, the ability to quickly grow one's rental property portfolio, and the luxury of hiring a property manager.

All the best!

[Wale Lawal]

Quote from @Robert Reynolds:

Hi @Diara Campbell, 

I would recommend starting out with a condo, and house hacking it. They have a cheaper barrier to entry, can get a solid 3 bedroom condo for $400-600k in Los Angeles. Multi-Family will start at around $750k in Los Angeles, and it's also difficult finding a property with vacant units in move in ready condition. With a condo, you will have little cap ex, and other maintenance issues, as that will often be covered by an HOA.

As far as investing with low-no money down, I would recommend the FHA loan at 3.5% down payment and then try to have the seller cover your closing costs.

 Keep us posted on your journey. Goodluck

[Charles Renn]

Hi @Diara Campbell, you have a lot of good advice here already, but if I can add anything, talk with an investor friendly lender. The good ones can setup a strategy for you long term so that you can put goals in place, ex. timeline for down payment, and fill you in on regulations, ex. stick to looking at 2 unit properties as 3-4 unit properties for FHA have strict guidelines that most LA County properties may not pass.

A last piece of advice, real estate investing always has some risk involved. Starting off accepting this fact will make the road toward financial freedom a lot more rewarding.

Hope this helps!

[Maria Fortner]

You need some skin in the game, take whatever cash and credit you have and leverage it to do Rental Arbitrage and rent a multi-family and then Air bnb it. Of course, there is "red tape" but it can be done. That's the best way to leverage what you already have. Another option is to find a lender "Non-conventional" that will lend on the property and not your credit profile. Lastly, find someone willing to seller-finance. 

[Eliott Elias]

Utilize seller finance and shoot for zero down

[Aleksandar Popivoda]

Based on your situation I would recommend to you - Don't rush into Real Estate. Whatever "creative" strategy you use you will need some cash reserves in your hands. Without it you are positioning yourself for the ultimate failure in this business. 

Instead, invest in yourself first. Learn as much as you can about your current job and what is needed to bring yourself to the next level. What are the hard and soft skills required in order to be paid more. Learn how to market and sell yourself. Make more money and build up your $ reserves. Once you achieve that you will figure out if the RE is the best path forward or you can get better Return on Investment by being the Go-To source in your industry. Good luck. 

[Nate Sanow]

@Diara Campbell money is one form of value. Finding really good deals is another, and, with really good deals the money follows. 

[Leona Usaty]

Quote from @Diara Campbell:

Hi, I am interested in starting my real estate journey. However, Just like most people I do have low funds for this type of endeavor. Yet, i know theres a way around this. I have been doing my own personal research on this matter and came across a few things; such as FHA loans, possibly leveraging my good credit score to get business credit and then use it as a down payment on a property, ofcourse hard money lenders, air bnb, and e.t.c... My question is what would be the best way to start out where i can obtain a multi family home with little to no money down and risk the chance of being in debt. Please help! Any advice would be greatly appreciated.

P.S i do work, but the funds i currently have just isnt enough.

Hey Diara, my name is Leona; I am a Realtor, and my team is working for investors; I will be happy to assist you with some sources and advice; feel free to contact me.
Leona

[Leo R.]

@Diara Campbell I see your post is about 4 months old--I'm wondering if you've been able to progress toward your investing goals? (and if so, what have you learned...and if not, why not?).

In response to your question, I'd say the best way for a beginner to get their start in RE investing is to house hack (either a single fam or small multi fam property). This strategy has many advantages--one of the big advantages being you can use an owner occupant mortgage with excellent terms and a minimal downpayment.

Good luck out there!

[Leona Usaty]

Quote from @Diara Campbell:

Hi, I am interested in starting my real estate journey. However, Just like most people I do have low funds for this type of endeavor. Yet, i know theres a way around this. I have been doing my own personal research on this matter and came across a few things; such as FHA loans, possibly leveraging my good credit score to get business credit and then use it as a down payment on a property, ofcourse hard money lenders, air bnb, and e.t.c... My question is what would be the best way to start out where i can obtain a multi family home with little to no money down and risk the chance of being in debt. Please help! Any advice would be greatly appreciated.

P.S i do work, but the funds i currently have just isnt enough.

 Hey Diara, I will be happy to answer all your quastion, text me,

Leona 

[Rick Albert]

It depends on where you want to live, how much you have for a down payment and closing costs, etc.

Personally, I house hacked a fixer condo in the Valley, then did a HELOC and then did an FHA 203(k) into a house and built an ADU. I've now sold the condo and did another HELOC on my property and bought two MFU units out of state.

What's great about real estate is there are different ways to do it. Buying a 3-4 unit can be tough with the FHA loan because of the self sufficiency test lenders require. Duplexes are interesting IF you can find a vacant unit. A house with detached ADU is a great option and what I and most of my clients do.