How did you fund your first deal
Member since 2022 路 65 posts 路 21 votes
How did you fund your first deal
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Investor 路 Austin, TX 路 Member since 2021 路 9k+ posts 路 5k+ votes
3yIf the deal is good enough the money will come. I would rather borrow from investors than family.
71 Replies
- Member since 2022 路 65 posts 路 21 votes3y
Quote from @Jaron Walling:
Before I bought anything I got my finances under control and hammered out bad debts. This took 3 years. My friend and I also saved $$$ by sub leasing with another roommate. Up until that point I was blowing money all over the place. I had a car payment and a high cost of living. I sold a motorcycle to pay off the car. We basically lived with a stranger. Everyone tries to save money but from my experience BIG sacrifices have to be made to make BIG dents.
During this time I found a passion for cycling and turned it into MARKET RESEARCH. You can see rediscover a whole city while riding a bike. It's easy to find coffee shops, breweries, and up and coming neighborhoods. This is one way to get off the beaten path and find the neighborhoods with potential.
Once I saved enough $$$ from the 9-5 job I started making low offers on distressed properties. It's not rocket science.
There you go! We are working through that right now, no roommates but paying off the bad debts and saving!
thanks for the feedback!
- Member since 2022 路 65 posts 路 21 votes3y
Quote from @Kiera Underwood:
FHA and house hacking! Bumped up price a bit over asking and asked seller to cover max allowed closing costs!
I love the house hacking idea! And the method of over offering I've noticed is great to make sure you can get a property!
thanks for the feedback!
- Real Estate Agent 路 Seattle, WA 路 Member since 2019 路 301 posts 路 188 votes3y
House hacked with a 3% down payment. Saved money from my job. Focus on increasing income and decreasing income and investing this difference.
- Investor 路 Member since 2021 路 591 posts 路 695 votes3y
@Dyami Pike I first analyzed my existing budget to determine what I was spending my money on...unsurprisingly, the three biggest expenses were my housing, my vehicle, and eating out....so, I moved into a much cheaper rental with housemates, I sold my car, and I stopped eating out, and I saved. I also consulted with a mortgage broker who helped me understand my DTI, and helped me understand what I needed to do to qualify for a mortgage...and then, I did those things....
Then, once I had saved enough, I put 5% down on a house, which I house hacked (I lived in the smallest, least valuable room in the house, and rented out the other rooms). I repeated that process over and over for years, buying another property approximately every 12 months, and taking advantage of the excellent terms of owner-occupant mortgages. Most of the houses I bought were 4-5 br, 3-4 ba, and most had at least one very large master suite that rented at a premium. My general rule of thumb was that, if I was living in the house, I wanted the rest of the rooms to net $400/mo cashflow, and if I wasn't living in the house, I wanted the place to cashflow $800-1000/mo. I was also buying mostly B grade properties in B grade areas that had good appreciation, and a good tenant pool...eventually, I had enough wealth built up that I could gradually begin improving my lifestyle (e.g.; occupying the nicest room in the place I was house hacking, then buying my own house, then buying a nicer house, etc.)...but, I was careful to avoid excess "lifestyle creep" --I didn't allow my increasing expenditures to out-pace my increasing income.
Good luck out there!
- Member since 2022 路 65 posts 路 21 votes3yLove it! That's probably the most common one! And investing your savings from debt reduction or investing your pay raises are the best ones I've heard!
Quote from @Bradley Dosch:
House hacked with a 3% down payment. Saved money from my job. Focus on increasing income and decreasing income and investing this difference.
- Member since 2022 路 65 posts 路 21 votes3yYes! Thats so cool! I'm trying my best to get there, so I can do some form of investing. Working on the debt reduction myself so I can invest the savings!
Quote from @Leo R.:
@Dyami Pike I first analyzed my existing budget to determine what I was spending my money on...unsurprisingly, the three biggest expenses were my housing, my vehicle, and eating out....so, I moved into a much cheaper rental with housemates, I sold my car, and I stopped eating out, and I saved. I also consulted with a mortgage broker who helped me understand my DTI, and helped me understand what I needed to do to qualify for a mortgage...and then, I did those things....
Then, once I had saved enough, I put 5% down on a house, which I house hacked (I lived in the smallest, least valuable room in the house, and rented out the other rooms). I repeated that process over and over for years, buying another property approximately every 12 months, and taking advantage of the excellent terms of owner-occupant mortgages. Most of the houses I bought were 4-5 br, 3-4 ba, and most had at least one very large master suite that rented at a premium. My general rule of thumb was that, if I was living in the house, I wanted the rest of the rooms to net $400/mo cashflow, and if I wasn't living in the house, I wanted the place to cashflow $800-1000/mo. I was also buying mostly B grade properties in B grade areas that had good appreciation, and a good tenant pool...eventually, I had enough wealth built up that I could gradually begin improving my lifestyle (e.g.; occupying the nicest room in the place I was house hacking, then buying my own house, then buying a nicer house, etc.)...but, I was careful to avoid excess "lifestyle creep" --I didn't allow my increasing expenditures to out-pace my increasing income.
Good luck out there!
- Real Estate Agent 路 Cincinnati, OH 路 Member since 2015 路 474 posts 路 580 votes3y
Quote from @Dyami Pike:
I'm looking at getting started in real estate and everyone talks about low/no money down. cause I've noticed that even a 10% down is $5k in my area, plus closing plus extra funds that the expect you to have. So even in the worst neighborhood in town I need $10k in cash.
My question is how did everyone fund there first deal(the part that the had to pay for)?
did you save from your job, borrow from family, side gigs?
As others have mentioned, house hacking is the best way to get started, 3.5% FHA or 5% down conventional. I did not learn about real estate until I had already purchased an expensive family home. I had to save 22k from my W-2 job to buy my first rental property with 25% down. If you can house hack 1 property per year you will accelerate much faster!
- Member since 2022 路 65 posts 路 21 votes3y
Quote from @Joseph Cornwell:
Quote from @Dyami Pike:
I'm looking at getting started in real estate and everyone talks about low/no money down. cause I've noticed that even a 10% down is $5k in my area, plus closing plus extra funds that the expect you to have. So even in the worst neighborhood in town I need $10k in cash.
My question is how did everyone fund there first deal(the part that the had to pay for)?
did you save from your job, borrow from family, side gigs?
As others have mentioned, house hacking is the best way to get started, 3.5% FHA or 5% down conventional. I did not learn about real estate until I had already purchased an expensive family home. I had to save 22k from my W-2 job to buy my first rental property with 25% down. If you can house hack 1 property per year you will accelerate much faster!
I'm starting the process of saving towards that 20% down, maybe 10% on a hard money loan so I can BRRRR a house or MFHthanks for the feedback!
- Columbia, MO 路 Member since 2016 路 14 posts 路 13 votes3y
For me, I sold some stock options I had from being an early employee at a startup. I didn't like the idea of having a ton of money sitting in the bank account, nor did I like the idea of putting it ALL in the stock market (smart plan since this was early 2021) so we put some into stocks, some into rental properties and the rest spread across other assets. We then used the rental properties as collateral to take out an additional mortgage on a fourplex. The rental income from the fourplex pays for the mortgage and leaves a decent amount leftover, while the other properties generate net positive income.
- Real Estate Broker 路 Minneapolis, MN 路 Member since 2011 路 5k+ posts 路 6k+ votes3y
@Dyami Pike Ok, so you've noticed that "Guru News" talk's about go get yourself a 0 cash 0 down deal right, BUT have noticed a HUGE void of anyone actually talking about having done it.
There is a reason for that....
Also, talk of max out your everything, 401K, credit cards, Aunt Sallies borrowed funds etc etc, and go use that epic leverage to go do REI. And noticing a HUGE void of persons yapping how great that all went.
Yeah, again, there is a reason for that....
Here is the Reality-Check. MOST, and when I say most were talking 90%+, who START in REI via these assorted fu#keries-of-finance, they FAIL, big time. How do I know? Because I am the shark who comes in and bails them out for pennies on the dollar. And while it may seem painful and vicious, it's not, I am saving them in that blood-letting. Fact is most who do that are oblivious what there doing and get into horrible "deals" at idiotic prices. I am neither, I know what i am doing and I price things right, so yeah, it hurts when I CORRECT the pricing. That's reality.
Fact is if you don't have the $ to "play" then your NOT ready to be a full blown active property investor, WHICH IS OK. It drives me BONKERS how there seems to be this mass delusion that everyone has to go from 0 too F-18 Fighter Pilot over-night. And yeah, that IS an accurate comparison, life as a real-deal investor IS like piloting a F-18 because risks are very high, very expensive, and mistakes are not forgiving, there's no pulling over to tinker on things, nope.
There is WAY better, smarter, cheaper, more successful ways to START. Know why you don't read about those, because it doesn't sell books, it can't readily be monetized by some "Guru", it isn't sexy and flashy talking about how to get rich SLOW, no, everyone wants to read that all they need to do is change a mindset and congrat's a check is in the mail for tens of thousands.
Your Step 1 should be find who the wanna-B's are in your area, and who the Legit "Doers" are in your area. Then Step 2 is find a way to hitch your wagon to the Doers. Find a way to serve them, work together. Be honest, say you want to be them one day, and you'd love to make them a million $ learning how, and to make a million $ for yourself in the process.
If someone came to me with that attitude, I'd put them through the pases, half way blow em off, but that's only to be sure there legit and will work through it, that they got the effort and perseverance. That earned, DONE, your in, all you'd have to do is be a great student and put effort in and youd make a lot of $, but most importantly, within 12-24mnth have the knowledge and experience from actually doing things, real life things, to be able to do it on your own.
Many of my investor friends and associates think exactly the same as I do, and would be open to the same. Because remember, were self-made too, once upon a time we were at 0, and had to earn our way in and up. So we have an appreciation for the grinder.
But all the high leverage antics, do yourself a favor and forget that BS, it's a fast track to NEVER getting into REI, just getting in to rapidly loose it all and then some. Were playing with things that cost hundreds of thousands of dollars, money is required, lot's of it. I bought my 1st deal with my reputation which got me OPM, BUT key is I had built a reputation via doing for those others in REI for some time.
The only E-Z Button is the one that leads to broke.
- Real Estate Agent 路 Dayton, OH 路 Member since 2021 路 10 posts 路 4 votes3y
As mentioned before house hacking would be my go to method. Putting 3.5% down on a 2-4 unit, depending on where you are located might be able to find a first time grant to help with this downpayment (rare with 2-4 unit).
Might also suggest a private money partner to go in with you.. a family member or friend. I would say a hard money lender but if you are trying to avoid upfront costs, you will still be hit with their upfront points and other charges.
1. FHA house hack2. Private lender/Partner
Best of luck my friend! - 3yJeff SchemmelBusiness MemberReal Estate Agent 路 Saint Paul, MN 路 Member since 2014 路 384 posts 路 401 votes
worked my butt off. saved $5k, and got the seller to pay my closing costs.
- 3yNathan FisherBusiness MemberProperty Manager 路 Cleveland, OH 路 Member since 2020 路 312 posts 路 264 votesInheritance for the first house, then no collateral, high interest personal loans from banks for the next 6. Houses were so cheap in cleveland, 50K got you a great low income duplex.
Got lucky and I accidentally timed it perfectly, Just before prices started to jump.
Aligned Properties Group4.291 Reviews - Member since 2022 路 65 posts 路 21 votes3y
Quote from @James Hamling:
@Dyami Pike Ok, so you've noticed that "Guru News" talk's about go get yourself a 0 cash 0 down deal right, BUT have noticed a HUGE void of anyone actually talking about having done it.
There is a reason for that....
Also, talk of max out your everything, 401K, credit cards, Aunt Sallies borrowed funds etc etc, and go use that epic leverage to go do REI. And noticing a HUGE void of persons yapping how great that all went.
Yeah, again, there is a reason for that....
Here is the Reality-Check. MOST, and when I say most were talking 90%+, who START in REI via these assorted fu#keries-of-finance, they FAIL, big time. How do I know? Because I am the shark who comes in and bails them out for pennies on the dollar. And while it may seem painful and vicious, it's not, I am saving them in that blood-letting. Fact is most who do that are oblivious what there doing and get into horrible "deals" at idiotic prices. I am neither, I know what i am doing and I price things right, so yeah, it hurts when I CORRECT the pricing. That's reality.
Fact is if you don't have the $ to "play" then your NOT ready to be a full blown active property investor, WHICH IS OK. It drives me BONKERS how there seems to be this mass delusion that everyone has to go from 0 too F-18 Fighter Pilot over-night. And yeah, that IS an accurate comparison, life as a real-deal investor IS like piloting a F-18 because risks are very high, very expensive, and mistakes are not forgiving, there's no pulling over to tinker on things, nope.
There is WAY better, smarter, cheaper, more successful ways to START. Know why you don't read about those, because it doesn't sell books, it can't readily be monetized by some "Guru", it isn't sexy and flashy talking about how to get rich SLOW, no, everyone wants to read that all they need to do is change a mindset and congrat's a check is in the mail for tens of thousands.
Your Step 1 should be find who the wanna-B's are in your area, and who the Legit "Doers" are in your area. Then Step 2 is find a way to hitch your wagon to the Doers. Find a way to serve them, work together. Be honest, say you want to be them one day, and you'd love to make them a million $ learning how, and to make a million $ for yourself in the process.
If someone came to me with that attitude, I'd put them through the pases, half way blow em off, but that's only to be sure there legit and will work through it, that they got the effort and perseverance. That earned, DONE, your in, all you'd have to do is be a great student and put effort in and youd make a lot of $, but most importantly, within 12-24mnth have the knowledge and experience from actually doing things, real life things, to be able to do it on your own.
Many of my investor friends and associates think exactly the same as I do, and would be open to the same. Because remember, were self-made too, once upon a time we were at 0, and had to earn our way in and up. So we have an appreciation for the grinder.
But all the high leverage antics, do yourself a favor and forget that BS, it's a fast track to NEVER getting into REI, just getting in to rapidly loose it all and then some. Were playing with things that cost hundreds of thousands of dollars, money is required, lot's of it. I bought my 1st deal with my reputation which got me OPM, BUT key is I had built a reputation via doing for those others in REI for some time.
The only E-Z Button is the one that leads to broke.
Thanks for the feedback James! I haven't actually done any looking into the gurus or read any get rich quick stuff. Josh dorkin and Brandon Turner have used that phrase on the podcasts and I never quite got the concept. I know FHA, but I was under the assumption, that there is no such thing as a no money down property, which led to the question. When I started my last business I learned that it cost money to make money, and just because you spend the money doesn't mean you're going to make money. And that was an industry I spent over a decade studying and researching before going out on my own.
im definitely not starting with $0 and expecting to make anything. And I've started networking with locals that are already successfully REI.
and I agree, people that want to go into business to sit on a beach and not work, are going into the wrong business. Just putting my feelers out to see how people started. The majority that I've talked to( that are successfully doing it) actually went with house hacking over working for a mentor for a couple years. Not saying that getting a mentor and shadowing/adding value to them is bad, but when you want to skin a cat, it's best to find out how many ways you can do that. And I think reputation is everything, it's just finding the right people who want to value your reputation.
- Member since 2022 路 65 posts 路 21 votes3y
Quote from @Nathan Fisher:
Inheritance for the first house, then no collateral, high interest personal loans from banks for the next 6. Houses were so cheap in cleveland, 50K got you a great low income duplex.
Got lucky and I accidentally timed it perfectly, Just before prices started to jump.Ohh cool! That's actually the first I've heard of anyone doing it that way! I haven't not inherited a house though so I may look at other options 馃槀
- Member since 2022 路 65 posts 路 21 votes3yThat's a great option, paid off properties no complaints there! I'm gonna start with the first good deal I can get and build from there!
Quote from @Joe S.:
1. Bought a mobile home on tiny piece of land for 10k
2. Seller financing. It paid for today..
Be willing to start small..
thanks for the response! - Member since 2022 路 65 posts 路 21 votes3yI feel like it's a lot harder now to find sellers that pay closing costs, but I like that idea! We have the cash to put a down payment or close to it, the closing is really what we are saving for!
Quote from @Jeff Schemmel:
worked my butt off. saved $5k, and got the seller to pay my closing costs.
- 3yJeff SchemmelBusiness MemberReal Estate Agent 路 Saint Paul, MN 路 Member since 2014 路 384 posts 路 401 votes
Quote from @Dyami Pike:
I feel like it's a lot harder now to find sellers that pay closing costs, but I like that idea! We have the cash to put a down payment or close to it, the closing is really what we are saving for!Quote from @Jeff Schemmel:
worked my butt off. saved $5k, and got the seller to pay my closing costs.
The last time I wrote an offer that didn't ask for closing costs on the buy side was earlier this summer...June I think. Since then every single transaction has had some kind of closing costs paid by the seller. The market shifted late summer, and I'm sure it'll shift back to sellers come spring, but it is common to win closing costs at the moment; at least here in Minneapolis/St. Paul. I've even won closing costs for my buyers after a surplus appraisal in a competitive situation. It can be done.
- Member since 2022 路 65 posts 路 21 votes3yI didn't know that! I'll have to make sure I include that in my offers, I guess it's better for them to counter than to lose our on a few thousand in savings!
Quote from @Jeff Schemmel:
Quote from @Dyami Pike:
I feel like it's a lot harder now to find sellers that pay closing costs, but I like that idea! We have the cash to put a down payment or close to it, the closing is really what we are saving for!Quote from @Jeff Schemmel:
worked my butt off. saved $5k, and got the seller to pay my closing costs.
The last time I wrote an offer that didn't ask for closing costs on the buy side was earlier this summer...June I think. Since then every single transaction has had some kind of closing costs paid by the seller. The market shifted late summer, and I'm sure it'll shift back to sellers come spring, but it is common to win closing costs at the moment; at least here in Minneapolis/St. Paul. I've even won closing costs for my buyers after a surplus appraisal in a competitive situation. It can be done.
- 3ySarita ScherpereelBusiness MemberReal Estate Agent 路 Chicago, IL 路 Member since 2018 路 659 posts 路 376 votes
@Dyami Pike It's interesting how many different ways people funded, found and navigated their first deal. Such a reminder that there's so many ways to get started. You just have to find the one that is best for your circumstances, needs and financial strategies.
- Rental Property Investor 路 Milwaukee, WI 路 Member since 2013 路 180 posts 路 104 votes3y
@Dyami Pike
I was able to partner with a fellow member on BP who provided half the capital needed to fund our first deal. I then found a seller willing to structure a seller financing deal. We put the capital towards down payment and improvements of the duplex, then when the land contract was due, we actually sold the property, paid off the previous seller and profited about $2K shy of what was paid to the previous seller at closing
- Member since 2022 路 65 posts 路 21 votes3y
Quote from @Sarita Scherpereel:
@Dyami Pike It's interesting how many different ways people funded, found and navigated their first deal. Such a reminder that there's so many ways to get started. You just have to find the one that is best for your circumstances, needs and financial strategies.
Absolutely! I like how much feedback I've gotten on this topic! I love seeing all the different strategies people use and I think post like this help for the people who do t know what questions to ask so it gets the gears turning for them as well!
- Member since 2022 路 65 posts 路 21 votes3yThat's awesome! I hadn't seen that method yet, and maybe find a partner down the road who would be interested in doing that! On the podcast they say repeatedly " it's better to have 50% of a good deal then to have 0% of no deal!
Quote from @Mike Lowery:
@Dyami Pike
I was able to partner with a fellow member on BP who provided half the capital needed to fund our first deal. I then found a seller willing to structure a seller financing deal. We put the capital towards down payment and improvements of the duplex, then when the land contract was due, we actually sold the property, paid off the previous seller and profited about $2K shy of what was paid to the previous seller at closing
thanks for the feedback! - Rental Property Investor 路 Fremont, CA 路 Member since 2018 路 38 posts 路 8 votes3yThank you for sharing this. Do you have any resources to learn about self directed IRA. I want to learn all pros/cons before jumping into it.
Quote from @Taylor L.:
I used a Self Directed IRA which I had built up over time through 401(k) contributions. I converted those into a Self Directed Roth IRA.
Thanks again
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