How'd You Finance Your First Deal

23 Replies

I also bought a condo: 30 year fixed mortage at 7.00%.
I purchased it for a great price and thats how I started off. Starting off slowly with your first property is a good idea, this way you can get your feet wet.

Marc

www.greenfieldent.com

I still can't believe this worked. Financed 1st deal by aquiring 100% financing by simply credit ( in definition, financing secured by shear credit is a debenture), bought property from builder at a discount of %10 by offering him a quick close (meaning no wait-time and no-marketing expense) and frequent business relationship, contract was struck before property was finished, found several buyers before property was finished and I closed. Filtered thru those buyers and found the quickest close. Had builder pay all closing costs.

Now,

The mortgage company gives you 2 months before you actually have to make a payment. Get the buyer qualified and ready to go right after you close. Sold the property at market price and made %10 discount that builder gave me.

Builder made $40,000

Me a quick $9750, would of made $14,100 but....I had to sacrifice roughly 3% closing costs to buyer (as builder did for me) for a quick close. Big deal, I made money out of shear paper and ink being moved around. I've never even been inside the house I sold.

Made a profit W/O coming out of pocket.....

So if your a broke *** college student like I was, who was good at paying interest bearing bills, Try this one out it might work....
If it doesn't, the consequences will be utter chaos, yeah
-Art

This is an awesome post! I'm getting really into this REO thing and it's really starting to make sense. I've found a couple of houses that ironically the day before I was to sign the purchase contract they were bought out from under me... :cry: I'm going with a hard money lender for a quick flip. The AZ market is great, just taking some patience to find great properties at a great price!

Here is how I bought 30 homes last year. I took out a 15k equity line on my primary residence. I purchased 3 homes on a land contract (5k down on each). The seller paid all closing costs. I then did cash out refinance on all three properties. Made about 60k, and still cash flowed on the homes about 300.00 per. I bought a bank owned home for $35,000.00 did 15k in rehab work, and refinced it at 80% LTV. It appraised at 81,000.00 dollars. I rolled this same money over 30 times, produced a monthly net cash flow of 11,900.00 dollars, and paid off my equity line.

When I work with new investors, and they do not have a primary residence, I find an investor willing to sell one or more properties on a land contract. If the investor has good credit, MBNA and some simular banks will give unsecured lines of credit up to 50 or 80 thousand.

The trick is to find homes with enough equity to not only get your initial investment back, but to make 5 to 10 grand extra on each deal, and working with a mortgage person that specializes in investment property financing.

AJ Watson
[email protected]

I let someone else finance the deals that I find. I do not use my own credit or cash and partner with friends or family to buy properties that I find. I find this to be the best route because I am not emotionally tied to the deal and rather can think through the best opportunities...

I like OPM.

Derek

All this sounds incredibly complex to me. Getting sellers to take out second mortgages. How do you get them to do that? You put 5k down on each of 3 properties using a land contract and end up with 3 properties? They cover the closing costs--other than getting out of the properties, why would someone do that? What's so special about a land contract? I think I understand the cash out refi (new mortgages on each with equity of approx $20k coming back to you in cash from each property).

I've got a fair amount of equity in my house I'd like to use. Any direction or insights would be appreciated.

hillbillywilly,

Many of our investors here are using their home equity lines to help them purchase properties currently and there are several routes you could take.

If you would like to discuss different directions in which you could go, I would be more than happy to help in any way possible. Email me whenever you get a free moment and I will take some time to discuss different options with you.

You can call as well if you would like at 317-753-7158.

Derek

Great thread, but lets bring it back to the basics. HillBilly, here is the good new and some more good news. First good news: YES you can do these types of creative deals like you read in this thread. Second good news: you don't have to worry about all of that for your first deal. What you need to do is search hard for a good deal and then figure out how to get it done.

My first deal was a 5 property package from a Mortgage Banker. I read in the classified section of the paper that they were coming to town (from Florida to Cincinnati) to unload the properties. I called the number and asked as many questions as I could to get ready for their visit. I met the two reps from the bank and went to each of the properties with them. That night I visited them at their hotel with some ideas for a deal. They told me that there were several people making offers on 1 or 2 houses. They also told me that they really wanted to dump all 5 and be done with Cincinnati. I scheduled a breakfast meeting with them the next day and went home. That night I crafted a couple of different options for them. All of my options included them selling all 5 properties to me. The next morning I met them for breakfast back at their hotel and presented the offers. They gave me some feedback and told me that they would take my offers to the President of the company. The next morning they called me and told me we had a deal. THAT WAS A RUSH! The only problem was that I didn't have the money.

I called up a guy that I had met previously in some classes that I knew was already starting to do a couple of rehab jobs. I told him the story and also told him I didn't have the money. He came with me to see the properties and he agreed to finance the deal with some of his private investor capital for 50% of all profits made. I obviously agreed and he became "my money guy". I immediately started to market the properties for sale (even before I owned them). Out of the blue came a buyer who wanted all 5. We negotiated a package deal and set up for closing. Once the deeds were ready, we needed to double close. In the morning, with my money guy at my side, we bought all 5 properties with cash and then went to lunch. After lunch the buyer came in and we sold all 5 properties for cash.

After all closing costs and everything the deal had a profit of $51,350 which I split with "my money guy". That was a good day.

The moral is that there was no seller carrybacks, no land contracts and no subject-to. Good old fashioned hard work, some sweating, some scrambling, a lot of praying and a hell of a pay day. The reason that it worked was because I found a great deal. When you find a great deal and let other people know, the money will appear. Just give it a try - it will work.

The problem with pulling out a home eqity loan on your house to puchase another property in now your stuck with two mortgages. The home eqhity loan as well as your primary residence. Too make matters worse, if your new property that you purchased is at a negative, your losing there as well. The only way this would be able to be pulled off is in a highly appreciated market.

I appreciate what you're saying but I'm fairly confident that I can turn the property over or rent it out to keep it in a positive cash flow situation. For me to get 100k in an equity line will cost me $562/month. If I'm keeping the property I've got insurance, taxes, maintenance, vacancies of another $300 a month. Rentals are around $1000/month so I'm cash positive in a worse case scenario of $100. Also if I find a lease/option buyer who can't get a mortgage to make the purchase on their own I would like to take the opportunity to sell them an option for 3-5% of the sales price (2100 to 2400 as a down payment rather than 20% makes me seem like a good guy) and then incentify them to purchase by taking $50-100 every month and giving that to them if they take the option. If they don't I still get the down payment which is at minimum another $175/month.

If I try to flip it first (my first option at this point) my house will cost me between 70-80, repair costs of 15-20 with a sales price of 120-130 with a worse case scenario 6-month turn in the area I'm looking. If I'm still in it after 6 months then I have to rent it out.

The area I'm looking at is not an appreciating area at all--maybe 3-5% annually. That's why I like the heloc and it's interest only payback and a quick fixer upper and onto the next project.

It's easy to do sitting here at a keyboard. Writing that first check for 70 to 80k, that's the hard part.

Naperbill

Hello all,
I am just getting started in this business, and I am wondering if it is possible to get a no money down loan for an investment property? Something like an 80/20 mortgage?
Any suggestions will be greatly appreciated.
Thanks :D

Originally posted by "Rvalles":
The problem with pulling out a home eqity loan on your house to puchase another property in now your stuck with two mortgages. The home eqhity loan as well as your primary residence. Too make matters worse, if your new property that you purchased is at a negative, your losing there as well. The only way this would be able to be pulled off is in a highly appreciated market.

I really don't agree at all with this viewpoint. Real estate investing is all about leverage. Unless your investing all of your own liquid cash into a deal, a debt is a debt is a debt. If you can use the equity in your home to get started you should. It is usually the cheapest money you can get your hands on. Also, you can get you hands on it quickly and you don't have to go through long approvals.

If you are going to use your own home equity, I would still advise getting to know the people at the local banks and the hard money lenders. You can talk to them about investor financing and that you have some home equity that you will use in the deal as well.

Ultimately, it is on you to make a good deal or you can lose money.

For those of you who do not own property you are in a unique position. You should really think about purchasing a building, as the owner occupant Purchasing a building that you will live in will get you a better interest rate. You will not have the huge money down issues.

For those of you who do not own property you are in a unique position. You should really think about purchasing a building, as the owner occupant Purchasing a building that you will live in will get you a better interest rate. You will not have the huge money down issues.

Could you elaborate on this please... I've thought about this several times and like the idea. How many units would you recommend for beginners, and how should management play into your decision?

I read the post about starting out and had to say that it seems like no matter how good you are, you have to get to know people in the industry and market before you really will see success. I was in the market for months and although I came across good properties, I wasn't able to invest until I found an investor who was willing to take a chance with the properties I found. Banks never give you the money you need unless you don't need it.

There are some investment companies that will actually listen to a good deal you have. numbers make sense and they will get into real estate deals. Anyway, just my advice. -Angela

A few people have asked for ZERO down investor loans for 1-4 unit properties. You'll want to disclose in which state the property is located and I will post the lenders. I might even be able to help structure the loan options if in the right state etc. But YES there are a few lenders who do 100% NOO (Non owner occupied) loans and some will even do it on a 4plex!!

My first property was a condo that I bought with 3% down and PMI. 6.5% 30yr fixed nothing glamorous. These days I use releverage strategies to get 100% financing and sometimes I have sellers pay 3% towards the closing costs to buy down the rate... or just do a short term loan if I have other plans.

I'm eager to learn more quick turn around strategies to build up some quicker capital, hoping to find some good mentorship. Actually, you all have made me realize I have a good opportunity sitting in front of me but I'm still trying to figure out the how... I think I need more capital

Tony Baricevic
Amerimac First Mortgage CA