Where did you get the money?!?

18 Replies

This came to mind from a blog post from Brandon Turner "3 Smart Ways to Make an Extra $1,000 a Month Through Real Estate Investing" as well as seeing quite a few success stories.  Aside from thinking how an extra $1000 a month would help me *coughstudentloanscough*  I've been still browsing, reading, absorbing information from this site but find myself wondering how people starting out funded their first real estate venture.  I've seen quite a few blogs about how to start when I just happen to find a couple of hundred thousand dollars when I washed my jeans (just joking about that) but I also wonder about those who didn't have the money flat out to spend on say a rental or a flip.

Hi @Seneca Stephens for me I borrowed from my 401K and was able to purchase my first rental property... I am a big believer in keeping your personal expenses low (Dave Ramsey principles) which has allowed me to save quiet a bit of cash every month...For my next investment I will continue to keep my personal expenses low and use my savings to buy my next rental.

I saved for ovr a year and tracked all my money in Mint. Then i took each and every bill and tried to reduce it, and I did. After a year I was able to purchase my first rental.

Good Luck!

My husband and I approached a Credit Union that was holding properties. We went to a business supply store purchased an Offer to Purchase Real Estate, placed our offer with the Credit Union. They wanted $25,000, we offered $5,000, and compromised on $14,500. 

 We applied for a construction loan with the commercial lending department. The Credit Union provided us with the construction loan. The house was appraised with a list of renovations to be completed. The bank then allowed us to loan up to 80% of the estimated completed loan value.  

We were able to draw monies as we spent. We would bring in the receipts and receive a check for the amount spent.

Part of beginning is finding a house that is a good deal, then bring the deal to ten different Banks and Credit Unions. You will learn with each office visit. If you can't work up the nerve to walk in the doors , then call the loan officers. You will learn a ton by talking to loan officers.  

This was a few years ago and things have changed, that is why I recommend talking to the loan officers. They will tell you what they are looking for and the steps to accomplish your goal. 

Remember there are good and not so good people everywhere, don't let one bad experience or person get you down. It is all about learning and moving forward.

@Seneca Stephens  

 We started out as owner occupied and then an owner occupied multi-family and put all the income back into our properties. This way we put less money down.

@Ramon Fyffe  and @Amanda Young  

Am in the same boat. Am trying to find funds for my first deal. Can you both please give more details about that first deal. Was the money for down payment? Rehab or both? how did you locate that deal and how did know it was a deal and determine the rent price. Thanks in advance

My first "flip"  I was in school for my Masters and found a cheap place to live which I bought, lived in and increased the value with sweat equity.  It was the least expensive property in the area and a local bank was willing to write the loan for the $28,000 house when the typical area house was going for about  $90,000. (I don't think anyone else with my budget was even looking at houses).   My credit was good I was paying my student loans regularly and I had like $2000 in the bank that I had saved from jobs at the university.  I was just a saver and going back I think even the banker wanted it to work for me. She called me back after they discussed my loan and said they would grant it if I could put down a little more which I scrapped up, made the fixing tougher but I got it done.  Really if your income is tight living in your investment is a good way to start.

It has been made harder by the new lending regulations, because those regulations made it basically impossible for lenders to make money on small mortgages.

But the short answer is, I saved money and then bought a house.  

@Amanda Young  

 First of all Congrats. You an I aspiration to all the singles Moms out there.  I hope I get over my fear of losing money and make a deal

Can you tell me if this was in a A-class, B-class or C-class neighborhood because I would prefer B/C-class but is hard to get anything that the price and numbers makes sense

@Seneca Stephens  

Earned some money, and I was buying ETFS in 2010 and 2011 when everyone thought that the world had already ended. I don't buy individual stocks, and I don't think the stock market is rational (nor do I think the real estate market is). I do think that when stocks are considered a 'bad investment' is usually when they are on sale.

Similarly, you can't hold stocks forever and wait around for the next market crash. Instead, when you have gains, and you feel like they are not undervalued, it's a great time to move them to another investment. I made my first downpayment with about 3/4 capital gains from my stock portfolio. I didn't move everything out of the portfolio, nor did I intend to put all that capital back in. In the end, I wanted to diversify between stocks and physical. Now, I am better for it.

Also in regards to comments from @Ramon Fyffe  @Amanda Young  @Colleen F.  We also live below our means and invest the rest. It's the only way to fly. All the other get rich quick schemes are just fad diets.

We haven't finished our first deal yet, but the cash we are using for our first deal-in-progress has come from a combination of second jobs (and a bit of hustling!), a very frugal lifestyle and saving every possible penny for over a year now (ask my kids when the last time they ate anything I didn't cook was) and a 401k loan. 

@Seneca Stephens   

Great question, and you will get a lot of different answers. For me, my saving started in 2007. Young 20's and living in NYC metro, and things got expensive quickly. I began tracking every dollar going in and out, and found I had a lot of unnecessary expenses. I learned to be frugal and save every dollar an minimize money going out. Once I saw that I spent hundreds each month eating out, I changed my spending habits. It all adds up quickly.

I still track every dollar to this day...

Originally posted by @Kwadwo Kyeremateng :

@Amanda Young 

 First of all Congrats. You an I aspiration to all the singles Moms out there.  I hope I get over my fear of losing money and make a deal

Can you tell me if this was in a A-class, B-class or C-class neighborhood because I would prefer B/C-class but is hard to get anything that the price and numbers makes sense

Why thank you :) It took me a while to pull the trigger, as I dont have any back up help to screw up and lose a bunch of money (i.e....a second income from a husband) I had to weigh in that consideration. I would say its a B class, very nice house. I'm currently looking at another tomorrow and again I've been saving since I bought the first house.

Originally posted by @Heather Jones:

We haven't finished our first deal yet, but the cash we are using for our first deal-in-progress has come from a combination of second jobs (and a bit of hustling!), a very frugal lifestyle and saving every possible penny for over a year now (ask my kids when the last time they ate anything I didn't cook was) and a 401k loan. 

Took me about a year too girl, and no eating out (well, very few times) no new clothes for me and I'm looking into getting a 2nd job too. Gotta do it some how :)

Also in regards to comments from @Ramon Fyffe  @Amanda Young @Colleen F.  We also live below our means and invest the rest. It's the only way to fly. All the other get rich quick schemes are just fad diets.

Agree 100%, no get rich quick scheme is going to get it.

I sure can @Kwadwo Kyeremateng

I worked with a local real estate agent and found the deal on the MLS. The 401k loan proceeds was used for a 20% down payment and the remaining funds are used for reserves for maintenance issues, vacancies etc. I was lucky enough to find a property with a tenant in place (she has been there for 15+ yrs). As far as tools to determine if it was a good deal or not, @Ali Boone has a pretty cool Rental Property Calculator I used to determine cash flow after all expenses, mortgage, etc. Biggerpockets also has great investment calculator tools under the "Analyze" tab.

Thanks for the mention @Ramon Fyffe   Glad it helped! 

Originally posted by @Ramon Fyffe :

Hi Seneca Stephens for me I borrowed from my 401K and was able to purchase my first rental property... I am a big believer in keeping your personal expenses low (Dave Ramsey principles) which has allowed me to save quiet a bit of cash every month...For my next investment I will continue to keep my personal expenses low and use my savings to buy my next rental.

 I've done this too.  Most Finance Gurus advise against borrowing from the 401k because you are "sabotaging your retirement", but what if you make 20% on a rental and 6% on your mutual funds... That's my mentality anyway.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Join the Largest Real Estate Investing Community

Basic membership is free, forever.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.