Where do I get the money?

23 Replies

Currently looking at this property but don't have any money to go with it. I think it's a good deal. Would make at least $600,000 a year.

The property is $15,550,000

Anyone know how I should get the money? I'm pretty new to real estate but I know this is a money maker.

That's only a 3.87 cap rate.

Make sure you can back up a potential investment with facts and figures when speaking with investors.

"I know this is a money maker."

Good luck.

@Angel Reyna

Will it make $600K after financing costs? The payment on a loan like that would be over $70K/mth ($840000/yr)

I was underestimating. Cap rate for the property is listed as 5.02%. I believe that if I could fix some stuff on there it could make a million a year. 71 units for $1200 rent a month is still considered pretty cheap in California.

Thank you for the replies.

You would need to run all the numbers and present that information to other people in hopes of finding investors. I would start with family, and friends then work outward.

You'll need enough money for a down payment (usually 25% unless you seller finance)

So you need to raise $3,875,000. Not too big of a deal. 

The raising isn't the hard part, its finding the deal and presenting the numbers. Especially since you're new to real estate.

i laughed when he said "I believe that if I could fix some stuff on there it could make a million a year."

this is not how you talk to investors. they need facts.

There are so many other properties out there that you can purchase with a way lower purchase price which has a higher cap rate. Iv seen properties for 400k with 13% cap rate. Dont focus on the purchase price, just because it is an expensive property it does not necessarily mean it is good profitable buy.  

Some people trying to raise 10k,30k for a 100k project might find some success with unsophisticated investors. If you are going out talking to investors with millions to tens of millions or more that is a whole other level. You have to demonstrate a very clear plan being ultra conservative and still showing the property cash flows.

If it doesn't make much money going in and then the sponsor does not turn the property around or improve it like they said then the passive investor could have funds stuck in the project or worse throw more money into it. The property could become an endless rabbit hole where the investor keeps dumping money in with little to no results.

@George P. That's why I'm writing on here and not talking to an investor. I'm new at this so please be patient with me.

Originally posted by @Angel Reyna :

George P. That's why I'm writing on here and not talking to an investor. I'm new at this so please be patient with me.

 no problem. you are shooting for the stars and that's perfectly fine. 

Thank you for helping me out guys. 

@Joel Owens Thank you for your response. I agree with everything you said. This may be one of those rabbit hole properties.

@Angel Reyna

You really should crunch all the numbers. Try to get any information on the building you can from the listing agent. Assemble everything into a nice easy to understand package and talk to your friends about it. It would be a great exercise for you to get your head wrapped around the numbers and how the deal would work. Then you talk to your friends and say "if you had the money would you invest in this?". It will give you some experience talking about the property to people and finding ways to sell the idea of it. 

You might want to do this on a coupe properties to hone your skills before approaching big money investors. It will really help to sound like you know what your talking about.

@Angel Reyna

You could analyze the numbers and find that you could buy the Nike Company or Coke in what seems like a great deal. Just ask Warren Buffet! He does it. 

But if you have no money, or no training in accounting, or no concept of formal finance, or no negotiating power, or no track record, and no deal analysis skills, then you will have no deal

How many real estate books have you read? Have your read 'What Every Real Estate Investor Need to Know About Cash Flow"? If not, you must. How did you come up with this goal of 50 units in 2 years? Is that actually possible? 

Don't let the tone of people on this site fool you. They want you to vote their comment up. In order to succeed, you must understand deal analysis, finance and accounting. You must also obtain mentors and you must have money or assets to lever against. 

Shooting for the start IS awesome and it's great that you're doing that. But you don't get to the stars in 2 years. You get to them in 10, 15 and 20 years. One of the biggest real estate developers in Cleveland started with a single duplex. Now he owns sky scrapers. Pretty awesome.

@John Kesner Thank you. When I find a property I go through the numbers a few times then I think about them for the rest of the day.

@Cary Ferguson Jr Thank you. I'll work on getting that book soon. Could you recommend a few more, if you can?

@Angel Reyna Don't waste time on pipe dreams. Start with the basics, build up your skills, income, net worth & investors will eventually see the value you can bring to a deal.

@James Wise   you boys are off to a good start.. up 1-0 in the world series..

warriors laid and egg opening night. .and of course the only team worse than the 49ers is the brownies.. LOL  but I digress this is a real estate site and all the dreamers that go along with it

Originally posted by @Varinder Kumar :

There are so many other properties out there that you can purchase with a way lower purchase price which has a higher cap rate. Iv seen properties for 400k with 13% cap rate. Dont focus on the purchase price, just because it is an expensive property it does not necessarily mean it is good profitable buy.  

This is true ... but by the opposite side of the same coin, just because it is cheap also does not necessarily mean it is a good profitable buy. 400k with 13% cap tells me nothing about profitability.

@David Faulkner I believe cap rate tells you something about profitability. But thats not the only thing one should look at as there are other variables involved when calculating profitability.

@Angel Reyna

I'd recommend the following books:

  1. Millionaire Real Estate Investor
  2. What Every Real Estate Investor Needs to Know About Cash Flow
  3. Rich Dad Poor Dad
  4. The Book on Rental Property Investing

I would also listen to the Bigger Pockets podcasts, especially the ones that discuss buy and hold strategies. Probably wouldn't hurt to take some accounting classes to get up to speed on all of this. 

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