Hacking your down payment.....

[Bruce Lynn]

Lots of new investors and some 1st time home buyers seem to have a tough time envisioning they can ever save enough for a down payment on an investment property.

We see plenty of requests here for JV or FHA financing or some other way to bridge that down payment gap to get started. What are some of the best creative ways you've seen people come up with $10, $20, $30, $40,000 down payments?

HELOCs if they own a primary......cash out refinance if they own a primary.

Borrow from family.

Side hustle for a year....uber/lyft, deliver pizza, Amazon warehouse, PM, cleanout services, garage sale item flips(Gary V style)

Medical Research....some pay $800 or more for simple vaccine research..some pay $5000 for a week of in patient testing.

Trade down cars....flip cars.....saw a guy the other day on youtube flipping riding lawn mowers.

Selling all their excess on FB Marketplace and ebay.

[Ken Nieves]

Vending machines/locations can be very lucrative too.  Large learning curve for newcomers, but it's an inflation proof side hustle.  Most products have a profit margin from 70%-300%.  But selling the location is where you can make money fastest.  

Example: I secured a high traffic location, purchased two used machines ($3,200), operated the machines for 7 months ($250 avg. monthly net) and then sold the location, along with both machines for $8,850.00.  After factoring in a few repairs, it averaged out to be a bit above $920/monthly net.

[Victor Alberto Vidana]

I would recommend for the sellers to do creative financing. Currently pitching creative financing on the market and agents are pretty open to it. Especially if the properties are sitting on the market for awhile and the agents are tired of it !

[Jevon Shaw]

Lots of great points mentioned already. If you live in a large apartment complex, a great side hustle is also Wag for dog walking and dog sitting!

[Paul Pratt]

In Florida there is a bond program that pays up to 10k of downpayment/closing costs. 

Also, there is the FL Hometown Heroes Program. Gives better rates and down payment assistance to law enforcement officers, firefighters, educators, healthcare professionals, childcare employees, and active military or veterans.

I'm actually surprised how many buyers I work with who are unaware of these options!

[Bruce Lynn]

Quote from @Jevon Shaw:

Lots of great points mentioned already. If you live in a large apartment complex, a great side hustle is also Wag for dog walking and dog sitting!

I had an assistant a few years ago that made good money doing this.  She lived in a high rise with a lot of travellers.  I think some people paid her $30-$40/day to walk the dog twice.  Started by accident.  Ended up also running errands for people, picking up laundry, and packages.  She wasn't really looking for it, just fell in her lap.   I had another client who's high rise told her she could leave the two tiny dogs alone at home all day while she was at work so she paid something like $40/day for doggie day care.  Only bought a house, so she didn't have to deal with that....So in the right place it;s a good hustle.

[Bruce Lynn]

@Paul Pratt  I had forgotten about those programs, but was tough to use the last few years....with all the competition.  Opportunity is back at least for a short period I think..those will be for owner occupied homes.   Some of those also have residency requirements...like you have to live in the home for 5 years.  If you don't you have to pay it back.  Getting it though might allow you to save more for the next property.

[Nicholas L.]

@Bruce Lynn

As long as the money is theirs.  I would never recommend that a new investor be 100% leveraged - for example, down payment from family + loan for rest = 100% leverage. (Unless the down payment is a gift.)

The first year is typically a stabilization period, and you just can't do it with $0 of your own cash.

The other ways - sure.  Figure out how to make it.

[Bruce Lynn]

@Nicholas L. I agree 100% leverage is super risky....not for me, but lots of people here do it. Plenty of other super risky stuff people do, but I guess everyone has their own tolerance. Often see STR in cities that prohibit it. Just seems like a receipt for disaster if they hunt you down...start implemented the $500/day fines and try to hit you with back hotel occupancy taxes which most people probably didn't collect or escrow. If they collected and didn't pay them that could mean jail time. Never heard of it, but wouldn't surprise me too if they decide to make someone the example they also raise your property taxes to account for higher value based on the STR income, and also partner with IRS for any unclaimed income. Since it is all probably pretty trackable...STR rental companies direct depositing into bank account. Ouch.... so wouldn't surprise me when people are trying to figure out ways to raise 3-3.5% for FHA loans, that they might not try to go all the way with 100% financing.

[Tim Delaney]

@Bruce Lynn as Ken mentioned - buy a business first. There are many opportunities out there to get into a well established business with very low or now money down using seller financing and/or SBA. The cash flow you generate can go into real estate.

[Ryan Mapes]

For those with at least a few doors in their portfolio...You could also try revenue based financing. Trade a portion of your future rental income in exchange for cash up front. You can use the cash as a down payment on a new property or for renovations on an existing property. Requires that you own other rental properties (funding is based on cash flow of these properties).

Doesn't require a personal guarantee, doesn't add debt, and doesn't take any of your equity.

Happy to chat if you're interested in going this route.

[Konstantin Ginzburg]

I've used a variety of methods for getting more capital for real estate. Selling collectibles on ebay (that wound up very lucrative during the pandemic when there was a huge rise in the popularity of various collectibles), investing in stocks, setting up side hustles with photography or other skills I had that I could leverage into additional revenue. 

A large portion for me though, was simply progressing upwards at my W2 job and earning pay increases over a 14 year career and then being careful with how that money is spent with a priority always placed on investing. 

Part of the strategies I have used though was finding financing options that minimized up front costs such as using house hacking to obtain primary residence financing options which typically come with lower down payment requirements and lower interest. 

[Abhishek Kapoor]

Can HELOC be used as down payment?

[Abhishek Kapoor]

Quote from @Konstantin Ginzburg:

I've used a variety of methods for getting more capital for real estate. Selling collectibles on ebay (that wound up very lucrative during the pandemic when there was a huge rise in the popularity of various collectibles), investing in stocks, setting up side hustles with photography or other skills I had that I could leverage into additional revenue. 

A large portion for me though, was simply progressing upwards at my W2 job and earning pay increases over a 14 year career and then being careful with how that money is spent with a priority always placed on investing. 

Part of the strategies I have used though was finding financing options that minimized up front costs such as using house hacking to obtain primary residence financing options which typically come with lower down payment requirements and lower interest. 

Agree, Stay focused.

[Konstantin Ginzburg]

Quote from @Abhishek Kapoor:

Can HELOC be used as down payment?

Yes, a HELOC on your primary residence can be used as a down payment. But keep in mind that using a HELOC carries interest payments with it which will increase your cost of capital and add on to the cost of capital that will be required for your new investment property loan. This increased cost of capital will need to be overcome to justify the additional property (the new property needs to be a very good deal).

[Bruce Lynn]

Quote from @Abhishek Kapoor:

Can HELOC be used as down payment?

On another property....so HELOC your primary, take that cash to buy a 2nd one.