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Bobby Sharp
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Advice needed for first deal

Bobby Sharp
Posted Jan 14 2023, 12:50

I’m relatively new to RE, but a friend of mine has given me the opportunity to buy 10 of his houses, all tenanted, owner financed, zero $ down, cash flowing between 200-500 each, all I have to do is pay closing cost (2%) for them coming out to around $25k, which I don’t have. Can someone please tell me the best way to borrow for this deal? 

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Cody Hawkins
  • New to Real Estate
  • Ogden, UT
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Cody Hawkins
  • New to Real Estate
  • Ogden, UT
Replied Jan 14 2023, 13:58
Quote from @Bobby Sharp:

I’m relatively new to RE, but a friend of mine has given me the opportunity to buy 10 of his houses, all tenanted, owner financed, zero $ down, cash flowing between 200-500 each, all I have to do is pay closing cost (2%) for them coming out to around $25k, which I don’t have. Can someone please tell me the best way to borrow for this deal? 

Hi Bobby, because you are doing a seller financed deal that opens up a lot of financing options for you. I used to be a banker and deal with lots of credit and financing options. If you currently own your home you can borrow against it with a HELOC. If not there are still other options for financing. If you have excellent credit you may qualify for an unsecured loan or LOC. You can also go the secured route and borrow against things like your business or vehicle with a secured loan or LOC.

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Nathan A.
  • New to Real Estate
  • Sunnyvale CA and Maplewood, NJ
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Nathan A.
  • New to Real Estate
  • Sunnyvale CA and Maplewood, NJ
Replied Jan 14 2023, 14:03

Another option is to find a partner who's willing to put up the cash. You bring the deal, the partner brings the money, and you split the returns.

That said, either your friend is being really generous or there might be something wrong or undesirable about these properties. Your friend must either really want these off his hands, or there's something about the seller financing terms that's extremely beneficial to him.

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Sanat Bhandari
  • Investor
  • Omaha, NE
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Sanat Bhandari
  • Investor
  • Omaha, NE
Replied Jan 14 2023, 14:09

@Bobby Sharp There's a couple options (in no particular order):

- JV with another investor since you have a great seller-financed deal

- Local bank/credit union to get a secured loan against your primary residence. You can also potentially get an unsecured loan with a higher interest rate

- Borrow from your friends/family promising them a 10% annualized return on their money

- Private/hard money lenders would most likely be willing to fund a deal like this

- Have the seller include the $25,000 in the purchase price and pay the closing costs so you're coming with nothing out of pocket

- (risky) Have the seller/your friend give you a credit for $25,000 which you can pay him within a year on top of your pre-negotiated agreement. 

- (risky) If you have a 0% interest credit card with a high enough limit, that could be an option too. 

- (risky) If you don't have a 0% interest card but have a balance transfer offer with a high enough limit, you could cut yourself a check 

If each property is cash flowing $200-$500 each, you can easily pay off the principal in about a year. Congrats on the deal, sounds like you might've hit a home run

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Bobby Sharp
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Bobby Sharp
Replied Jan 14 2023, 14:22

Thank you all for your advice, I greatly appreciate it. 

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Nathan Gesner
  • Real Estate Broker
  • Cody, WY
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Nathan Gesner
  • Real Estate Broker
  • Cody, WY
ModeratorReplied Jan 15 2023, 05:48
Quote from @Bobby Sharp:

If this deal is real, it's a deal of a lifetime and you shouldn't pass it up! I would sell my cars, my furniture, and at least rent out the kids to a Nike factory in China to make this happen (just kidding).

Ten properties cashflowing $200/month = $2,000/month or $24,000 in a year. If you have $5,000 in savings, you could borrow $20,000 from a relative and pay them back - with interest - in less than a year.

You could charge this to a credit card with 0% interest, then hustle like your life depended on it to pay that card off before the interest rate changes.

My concerns are two-fold:

1. You don't appear to have any savings or knowledge of how to obtain $25,000 for this deal. This is a strong indication that your personal finances are not in order. If you can't handle what you've already got, there's a good chance you can't handle more any better. 

2. How are you calculating cashflow? I suspect your numbers are off and this deal isn't as strong as you think.

I've been wrong before, at least once. Prove me wrong and make 2023 the best year ever!


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John Morgan
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  • Rental Property Investor
  • Grand Prairie, TX
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John Morgan
Pro Member
  • Rental Property Investor
  • Grand Prairie, TX
Replied Jan 15 2023, 06:09

@Bobby Sharp

Deals like this always seem to fall in my lap when I'm broke and have absolutely no money. Lol. Here's what I've done. HELOC on my primary (2x's to get houses). Cash out refi on my primary (to buy 3 rentals with 20% down). Sell stocks in my Roth IRA (2x's to buy houses). And 401k loans (did this 3 times to snag houses). My credit union offers a consumer line of credit up to 25k …with a terrible interest rate. Lol. But I did this last April to use as a down payment on a great off market rental house I bought that was heavily discounted and cash flowing me $700/month. I've used Citi to borrow up to 25k with zero interest for a year with a 3% processing fee to pay for rehabs or down payments (4x's -lol). I've also opened up 0% interest on new credit cards for 12-18 months. I would put all my expenses on it and use that cash I was spending on everyday things and put that cash to use with real estate. This is what I've done to scale up to 17 properties in 8 years with almost no money out of pocket to get the deals or pay for the rehabs. The cash flow paid off all these loans I took out so it's all good. And now the cash flow is 12k/month net after all my expenses, so I'm glad I took the risk to grab these deals that came my way over the years. Good luck!

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Joseph Beilke
  • Real Estate Agent
  • Palm Coast, FL
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Joseph Beilke
  • Real Estate Agent
  • Palm Coast, FL
Replied Jan 15 2023, 06:23

Okay, so after doing a little math your 2% =$25,000.

Which means total purchase price is 1,250,000

Average home price is $125,000 

Cash flow is between $200-500 per house per month. $2400- $5000 Per month and $28,800 and $60,000 a year.

1,250,000 Loan at 5% of  PI is $6,710 per month over 30 years.   

Something does not add up!  

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Eliott Elias#3 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
  • Investor
  • Austin, TX
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Eliott Elias#3 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
  • Investor
  • Austin, TX
Replied Jan 15 2023, 08:56

I'll buy the deals from you and pay you a finders fee.