Kennesaw, GA · Member since 2017 · 18 posts · 13 votes
Hi everyone,
I have been reading books, blogs, attending webinars for about 3 months now. My goal is to buy my first property by year end. I obtained pre approval for an investment property and talked to a real estate agent to set up automatic alert for properties. But at this point, I feel stuck. I don't have cash set aside for down payment or closing cost. Even if I found a potential good deal, I can't make an offer; not enough cash.
I don't know what my next step is. I'm not interested in being a wholesaler. I analyze properties on daily basis, but that is all I do at this point.
Did anyone start an investment career with no cash?
Real Estate Agent · Hamilton, NJ · Member since 2013 · 464 posts · 311 votes
9y
Can you cut down your current monthly expenses to be able to start saving? Can you switch to a new job where you'll make more within the same industry? Can you pick up a second job somewhere and use that income to save for a down payment/closing costs? Can you sell some items you own that you don't "NEED" or use anymore? Can you use some/all these strategies mentioned above to save and earn more money?
You can also try to use creative financing to get you a deal, although I feel like that might be harder then some of the things mentioned above. Best of luck!
Real Estate Agent · Hamilton, NJ · Member since 2013 · 464 posts · 311 votes
9y
Can you cut down your current monthly expenses to be able to start saving? Can you switch to a new job where you'll make more within the same industry? Can you pick up a second job somewhere and use that income to save for a down payment/closing costs? Can you sell some items you own that you don't "NEED" or use anymore? Can you use some/all these strategies mentioned above to save and earn more money?
You can also try to use creative financing to get you a deal, although I feel like that might be harder then some of the things mentioned above. Best of luck!
LAS VEGAS, NV · Member since 2015 · 5 posts · 0 votes
9y
Me too so I'm going to read your comments responses today!! I'm tired of people asking for my money, I just need a mentor (who after a deal would be happy to take care of) Just someone who cares and not wanting to rip off newbys! Headed to Vegas to do some deals so I'm with ya!
Investor · Portsmouth, NH · Member since 2016 · 45 posts · 21 votes
9y
Justina,
You might of looked into this already but if not, you could try to do FHA loan which is 3.5% down. The only rule with that is you must live in the property for a year, but it gets you into the game.
There are also grants you may get to pay for closing costs. Try looking at the HUD website for your state.
Another thing, I had a co worker get offered by a bank to do 0% down conventional loan on his the house he just bought. It is his first one. A SFH that him and his wife are going to live in. He ended up doing a 3% down though instead. Not sure how to feel about that, I would be cautious with something like that.
Kennesaw, GA · Member since 2017 · 18 posts · 13 votes
9y
Hi, thanks to all who responded! Appreciate your support.
I wish I could house hack. I have a family so it would be difficult to move. I already have a home and can look into equity. Cutting back further on expenses is what I will have to do. Like many Americans I have debt (credit cards, car, home etc.), so one of my immediate goals is to pay them down. I have made many financial mistakes over the years. I know once I'm in a better position, I need to start buying assets.
Maybe I need to learn to be a wholesaler to get the cash I need!
Real Estate Consultant · Cleveland, OH · Member since 2016 · 511 posts · 345 votes
9y
@Justina R. Do you have a local REIA that you can attend? Do you have friends or relatives with money? Networking is the key to this business! I am doing my first flip, and I have all in about $8,000 of my own cash. All the rest came from other people's money. You can do it, and if you want it bad enough you will find a way.
Please don't wholesale unless you are REALLY good at finding win-win deals and understand how to do it right. Please...
Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
9y
Justina R. So this won't directly answer your question but you inevitably end up with two choices:
1.) Look at your capital, what you will qualify for, and try to find the "best" deal within those parameters. Which (personal opinion) is why so many people start off in wholesaling or buying an SFR in a C- or D neighborhood.
2.) Look at what you want your starter deal to be and back out what you'll need for a.) reserves, b.) downpayment (likely 3.5% FHA), and c.) closing costs. Then look at d.) what you save per month:
(a + b + c)/d = months until you can buy
Odds are that you'll need to increase "d". It's why you see people talking about bringing lunches to work, driving for Uber at night, etc. Or get a weekend job working for a local property management company (if you can) so you get a sense of what dealing with tenants is like, prevailing costs for maintenance and repair, good vs. bad local service providers, etc.
Granted, none of this is a "fun" answer but it probably puts you into the "prudent" side of things.
Hi, thanks to all who responded! Appreciate your support.
I wish I could house hack. I have a family so it would be difficult to move. I already have a home and can look into equity. Cutting back further on expenses is what I will have to do. Like many Americans I have debt (credit cards, car, home etc.), so one of my immediate goals is to pay them down. I have made many financial mistakes over the years. I know once I'm in a better position, I need to start buying assets.
Maybe I need to learn to be a wholesaler to get the cash I need!
House-hacking can can be done with a family. It certainly makes it a lot tougher and I'm not discounting that, and I'm not saying you should house hack. I'm just pointing out the importance of realizing that in everything you are making a choice, and owning that choice. If you choose to stay in your house vs the inconvenience of house hacking with a family that is perfectly fine. Just realize that means you are choosing your comfort over getting started sooner in real estate. Or you could sell your car and buy a very cheap, but reliable one with no payment. Or any number of things.
This is not a judgment or advice in anything other than fully owning 100% of your decisions as well as owning all the consequences of those decisions. In all things you are the one choosing that exact thing over the other options. Owning that in all decisions is a key to contentedness... such as if you look at everything, and decide the comfort of your family is more important than starting your investment journey right now, you will be much more content waiting another year or two. If you decide to do everything you can to get started right now, you will be much more content giving up the comforts.
Kennesaw, GA · Member since 2017 · 18 posts · 13 votes
9y
Yes, agreed. We all have to make the best decision we can for ourselves given the circumstances.
I don't own a nice house or a fancy car; I actually drive a beat-up car. My kids are not in private school but are in a decent school district. I chose not to disrupt that.
I can survive with bread and water if I only have to worry about myself.
Buying my first rental by year end perhaps isn't a realistic goal at this point, but I'm ok with that. I will continue to take action and work on this until I get my first rental.
plantsville, CT · Member since 2017 · 32 posts · 9 votes
9y
Sometimes it takes a lot sacrifice to get what you want and to be where you want to be financially often a lot of people think it's easy until they have to do it themselves. The best thing you can try to do is continue networking and learning and in the mean time take a LOT OF action and cut down expenses by figuring out where/what you need to do to save ... trust me I didn't think I could cut down any further in my expenses till I sat my butt down and figured out my finances which in turn saved me $12k extra/yr in cash on top of what I was already saving. Maybe you can partner up with someone, house hack by using FHA loan ... look for for sale by owner as well ... you'd be surprised how many properties are for sale by owner in that way you can negotiate about down payment ,length, interest rate etc ... there's a lot of ways you can do this you just have to keep pushing! Good luck you'll get what you want !
HVAC Tech · Fort Wayne, IN · Member since 2015 · 423 posts · 223 votes
9y
Just Like Igor said. Theres plenty of distressed landlords out there that would love to do a land contract just to get rid of being a landlord. You just have to get out there and find them. Whatever you put your mind to, you can accomplish. Seriously. Ive bought 3 of my places on land contract, and geeting ready to do a no money down deal. I used to be in your situation, probably way worse. But I made up my mind I wanted to get in the game. One thing to remember though, when a distressed landlord is trying to get out, you need to figure out why. Most likely her property is not smooth sailing. You dont want to get yourself in trouble by buying a money pit right off the back. Best of luck.
Flipper/Rehabber · Edmond, OK · Member since 2016 · 209 posts · 107 votes
9y
Do you own your own home? If so, consider a HELOC or 2nd Mortgage to get started. If not you should really look into "House Hacking." I wish I would have known about this investment strategy when I was a younger man.
Investor · Norfolk, VA · Member since 2014 · 164 posts · 51 votes
9y
I understand not wanting to Wholesale but the biggest take away and valuable skill I believe in wholesaling is being able to market and come up with ways to find great deals. That itself is a skill that everyone can benefit from . So maybe spend time learning all the tactics used so that way you can find yourself good deals you can structure creatively.
Rental Property Investor · Allentown PA, United States · Member since 2016 · 567 posts · 442 votes
9y
I think getting your personal/family finances in check should be held paramount before considering an investment property. Yes wholesaling can generate people some quick cash, but if you already have a full time job and a family, I think you may be in for a rude awakening of just how much work goes into getting your first deal(which statistics show can take months of mailers and thus $$$ before getting a deal).
If you are paying credit card debt off with interest, most likely it is in the 16%+ range, which almost no investment property off the MLS will have an ROI high enough to justify putting off paying your credit cards in exchange for a rental property.
Once your high interest( > 8% interest) debt is paid off, I think your next step should be put a 10% "personal tax" on yourself by forcing yourself to set aside 10% of your income towards investments. I know plenty of people say it cannot be done, but if the government were to do this, I'm sure you wouldn't starve; in fact many people by more closely tracking their finances feel liberated knowing that their quality of life has remained roughly the same while saving for a future investment.
Once you have a decent amount saved(I would recommend around 20k), I would either look for a high ROI rental property off MLS with minor rehab needed to add some value, or possibly begin networking and looking for deals that you may be able to bring to a more experienced investor in your REA that may be willing to partner if you either handle the majority of the day to day operations of a rehab(whether you flip or BRRRR it), front most of the money, or bring a deal with so much meat on the bone that they can't say no to. In my opinion, I think it is nearly impossible for a bank or a partner to trust you with business financials if you are not yet secure in your personal financials, so once that is in order, look for ways to add value to those more experienced than you. Whether its through market knowledge, cash, a competitive advantage, hustle, or sometimes just a good credit score to partner on a loan with someone, anyone can build wealth through real estate. Just make a plan, trust the process, and keep moving forward :)
Kennesaw, GA · Member since 2017 · 18 posts · 13 votes
9y
Thanks Bill. I agree. This is a reality check for me. Getting financially ready should be my first priority. While I work on it, I will continue to educate myself and analyze deals. Not sure why I put this end of the year timeline on myself. The sooner I start the better, but I can't start until I'm in a good position to do so.
I have a full time job with decent pay so 20k is doable with time. Have to say no to the kids and explain to them what I'm trying to do. Tighten up the budget!
Sherman Oaks, CA · Member since 2016 · 33 posts · 3 votes
9y
Justina R. Good luck on your plans to start REI, I wish you the best. I am also a newbie and am just trying to learn and get my finances in order for that first deal. I need to be less of a spender and more of a saver.
Investor · Leesburg, FL · Member since 2014 · 73 posts · 86 votes
9y
@Justina R. From reading your responses above I think you are trying to put the cart before the horse. I believe you need to, like you mentioned, is get your financials figured out so that you can make REI a reality. Here are a few things that might help you out if you aren't already using/doing them:
Use mint or personal capital to get a global view of where you stand and to track your income/spending.Create a budget and try to stick to it.
Get rid of all the extra stuff you don't need. Look at those "self renewing" services you might not even use anymore (Sirius XM, Netflix, Hulu, etc.)
Use your initial savings to get rid of any high interest (Credit Card) payments first! Your returns in real estate will probably not beat those so get them off of your books.
Then begin to save for REI
I went through a similar process to get my start in REI. Once you get the process rolling its a lot easier. Educate yourself as much as you can in the meantime.
Kennesaw, GA · Member since 2017 · 18 posts · 13 votes
9y
Thank you Jay! Yes, I am using Mint now. I paid off two credit cards and will pay off my car by month end. It makes good sense to get rid of credit card debt before investing. I am close.
West Lafayette, IN · Member since 2017 · 1 post · 1 vote
9y
I tried Mint. I think you can get a better grasp on your financials with some DIY work to make a "money calendar", although it can be a pain.
Use Excel or download LibreOffice for free and use their spreadsheet program. In one sheet, list all your expenses. You can go through your bank account and credit cards to see what recurring monthly payments you have. You can average your groceries over the months. Stuff like that.
Since bills and income are regularly scheduled, for the most part, you can project about how much money you will have and when. Make a calendar in another sheet of Excel/LibreOffice. Start with how much money you have in your account now and add/subtract income and bills for the rest of the year on the days money comes in/goes out, using the cells from the other sheet that are labeled and have the corresponding numbers.
I think this is more useful than Mint. Last time I used Mint, I don't think this was something you could check. It'll alert you to any wasteful spending you can cut and really give you a clear view of your financials, I think.