Down Payment

2 Replies

Hello,

I am new to this forum and would like some guidance/ideas on how to approach buying my first property.  I know this information is out there on this forum, but thought I would posy my own discussion.

I have recently begun looking for my first investment property, and have been faced with a decision. I am looking to do a buy and hold and continually increase this portfolio over the years. I have saved enough capital of what I first imagined would be my down payment, closing fees and a few month vacancy buffer. While looking for properties however, the ones in this price range all seem to need extensive work and repair (something I do not want to do on my first financed property). I have also found properties in a higher price range, that appear rent ready (with some already having tenants) and great cash flow (1.5-2%). I met a realtor who i've formed a good relationship with and is my direct access to MLS listings. The issue is, with my first straight investment property, i'll need to put 20-25% down and do not have that, along with higher closing fees, etc.

I am really eager to get into this type of investing, and feel as if It's the right time for me.  Before I start asking family/ friends for this money, I am just researching on what options I have.  I know a partnership is possible, but I currently don't have anyone I feel comfortable doing this with.

Wait for personal money (probably about 10-12 months out of just saving) or get creative?

I appreciate anyone's ideas. Thanks!

@Nicholas Ferraro

Some ideas

JV with someone to put in the down payment if you find a good deal

Some companies offer 401K loans

FHA financing

Seller financing

Some HML may offer financing for newbies if you have the credit and some experience

More importantly, you still need some reserves to start. If you don't have much yet, try to build some cushion first. Last time you want to happen is if a deal goes south and you're in a bigger hole. 

@Nicholas Ferraro

You could buy a multifamily property under 4 units and live in one of them. That may open up an FHA loan or some other loan options with lower down payment requirements. Owner occupied are much easier to get financed and at better terms.

This could allow you to, start investing, look in the nicer areas, keep close tabs on your rentals, and get good cashflow all while building experience. Once you have 12 months of history owning a rental the banks will apply 75% of rental income to your DTI (debt to income ratio) on the next one. So you could potentially be more appealing to the banks once you have a rental property than before, even though you have more debt.

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