Seller finance + private money?

Question

Hello! I have been looking at getting into real estate investing and have had a hard time getting started (hoping a lot of you can relate!). I don't have a lot of money to start (about 10k cash) and it seems like all investment properties require 20% down. I was surprised to find out even hard money lenders want 20% down- how do I get started??

I have found a house in my city that will do seller financing with 20% down but that means I would need a 100k down payment and then also finance the renos. Is there a way for me to pair the seller financing with a hard money or private lender financing (like 20% from a private lender, 80% from the seller, 10k from me for renos?). Or is the 20% downpayment expected to come from my pocket?

Is 10k just too low to get into real estate investments? Any advice/ thoughts is greatly appreciated.

I have a degree in computer science and would love to trade real estate knowledge/advice for code+website help, if anyone is interested!

Nathan Gesner · Answer

You need to be realistic. You can't buy a Ferrari with a grocery bagger job, and you can't invest in Denver, Colorado with $10,000. Your choice is to figure out how to increase your funds or find a different market. There are still markets around the country with houses for sale under $100,000 but it takes work to find them and it takes a lot of work to manage them because they are lower-class properties.

Consider reading "Set for Life" by Scott Trench for some ideas on improving your financials and getting started in an expensive market.

Stacy Rozansky · Answer

@Madeline McKune have you considered house hacking? You can get much more favorable loan terms and put down less of a down payment if it is your primary residence. There are loan programs that help subsidize down payment and closing costs that could help you get into a home for around that $10K mark. Happy to discuss this with you further if it is of interest.

Madeline McKune · Answer

Thanks Nathan! I will add it to my reading list.

Nate Sanow · Answer

In some cases I and my clients are able to acquire property via HML with 0% down as some of the better HML guys offer 100% LTC. This requires finding REALLY good deals, and probably being in a cheaper market like mine. This answers the question of how to not do 20% down. Now the issue with the $10,000 could be a different issue, and you might want to try to at least 2x that before taking on a project. Even at 100% your holding costs could evaporate your reserves in 6 months, and even if the lender provides some funds for the project rarely is it enough.

Chris Seveney · Answer

@Madeline McKune

Consider bringing on an equity partner vs another loan. They would take a greater percentage of profits but you would get experience and a part of the deal and something is better than nothing.

Real estate is a long play and not a get rich in a few years but build wealth over decades.

That would be my recommendation to look into an equity partner

Eliott Elias · Answer

Hard money is going to want 1st position lien on the property, it's unlikely they loan the down payment if the first position lien holder is the original owner

Michael Key · Answer

You found the key to your problem already. However, that deal might not be the deal for you. This is something a lot of new investors don't learn right off the bat. You don't need a bank, and you don't need a realtor and the MLS (no matter what they say). You can find yourself an off-market seller financing deal. But it's going to take hustle, and it won't be overnight and it will require finding the RIGHT seller to partner with. It's a numbers game, the more searching and reaching out you do the better your chances. Start going to local REI meetups and connecting with people and asking about off-market deals, seller financing and looking for private money lenders. Ask them what a win is for them, what they are looking for when they partner up with someone.10k might not be enough. But it might be in another market. I am friends with a couple here locally that are teachers, they make a combined 65k a year. And yet they own 8 rental properties. Because they don't buy here in Idaho, but have been buying in Colombus, OH where houses are 50k.If I had a time machine I wish I could go back and tell myself how important relationships are in this business. If you want to grow your portfolio, you will need to do so with other people. Especially if you want to grow quickly. The right relationships will open doors.

Seller finance + private money?

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