How to begin with what I’ve got....

6 Replies

Hello all. I’ve been reading articles and listening to podcasts and attending as many webinars as I can on BP for about a month now. I’m learning tons, and I feel like I’m mentally ready to get a house hack going. However the tough market I’m in (Nashville) and my current finances are what is holding me back. I only have about $8k saved up (and that’s EVERYTHING), and from what I’m hearing from an agent I’m talking to, that’s about half of what I need to get going. (Down payment plus closing costs.) I know that closing costs are often either payed by the seller or rolled into the final price, so why would she tell me that? I’m also not super keen on the idea of using ALL of my current cash to get get going, but I am willing to do it for the right property. (I have a decent job, and I know I can re-coup in another 6 months or so.) I’ve considered getting a personal loan, but I’m not sure how to sell the idea of helping me get into a house-hack to anyone. My initial thought was to ask my father (who is living on his inheritance) for a $10k loan, but he doesn’t think that now is a good time to get into RE. He sees the market going up, and that it’s a sellers market, and says I should wait for the next crash to happen before I jump in. I say that the longer I wait, the more money I’m leaving on the table. I want to get going NOW!

Do I offer a payback with 10% interest in 3 years to him? I feel like that’s VERY possible to pull off.

Would another investor be willing to do that kind of deal?

How do you approach an investor for help getting started that makes it worth doing for ALL parties?

Should I just buckle down and save up for another 8 - 12 months? This seems like the most feasible option, but it also seems like prices and rates are going to continue upward in that span.

I’m not at all attracted to the idea of a wholesale operation, but perhaps that would be the way to get started?

I’m all-in, and all ears. Thanks in advance for sharing your thoughts.

Don't feel pressured to start investing when you have no significant capital to invest. 1) You barely have enough to cover down payment and closing cost 2) You are going to use another loan to add capital and 3) You are in a tough market (Nashville); that means you are in a seller's market and could easily get outbid multiple times.

There are more money to be spent than just down payment and closing, there is minor to major repairs needed to bring the property up to par prior to getting it rented.  

If I were you. I would wait it out or look outside of my target location where the market is a little cheaper. I know the wheels are turning in your head to do some creative financing but don't do something that could put you into a deeper whole than you already are.

When we are desperate is when we lack common sense.

Hi Joel!  What sort of property/price range are you looking to house hack?  With a little more info I can give a better opinion.

@Joel Harrison It is great that you are reading and learning.  You currently have one leg of a three legged stool.  You may have time, but not fully educated and little or no money.  Find someone that has the other two legs.  Team up with them and learn from doing and still have the safety of their experience.  Find someone that could benefit from your energy and commitment.  Don't go to someone hat in hand asking for a mentor,  go to then with energy and excitement and explain how you can be of benefit to helping out their business.  

Part of this statement makes sense "My initial thought was to ask my father (who is living on his inheritance) for a $10k loan, but he doesn’t think that now is a good time to get into RE. He sees the market going up, and that it’s a sellers market, and says I should wait for the next crash to happen before I jump in"  If the market was assured to keep going up you would probably be ok, but what if it corrects, just as you jumped in.  If you could make the payments and wait until the prices return, you would be ok, but what if you can't and you need to sell at a loss.

@Joel Harrison great to hear you're focused on starting down your own REI path. I wish you much success.

First reaction to your post is to urge you to keep enough in the bank for a rainy day.  They always come, and you'll never want to be without some reserves... even if you have a decent job and even if it's just for a few months.

There's certainly no rush. Get your affairs in order (education, finances, knowing the market, a good realtor, a good contractor, etc) then jump in. How you jump in is important (aka buying right). In my opinion, the best way would be to find a fixer-upper plex that will sell well when rehabbed. Local banks will often finance both the purchase price and the rehab. Get it for a discount, update it, live in one unit, rent the other(s). Get it to market value. Then refinance it to get some/most/all your cost out of it. The typical BRRRR strategy, but such a great way to leverage your limited financial resources.

You asked specifically about financing. Certainly the loan scenario you described with your father makes a lot of sense. 10% annual return is certainly WAY more than he'll make with any bank. There may be some on BP or in your local REIA also willing to provide funding. However you come up with the downpayment, you'll just need to focus on the numbers. If the interest you're paying your father or someone else, combined with the interest on the mortgage, combined with the principal paydown, the rent received, the expenses... if everything results in cash flow that meets your goals, then it will all come down to mustering the faith to take that next step.

I would highly recommend connecting with someone locally who has house hacked... pick their brain, learn how they made it work, etc.  Seeing success first hand will be a huge confidence boost until you can experience it yourself.

I hope there's a helpful nugget or two in there.  Best of luck!

Hi @Joel Harrison I am in the Murfreesboro/Nashville area as well and am in a similar situation. I have met a lot of people around here who have done great things in REI starting with less, and the common traits they all seem to have is hard worker, creativity, and most importantly, persistence. Feel free to connect, maybe we can meet for lunch one day.

So many great suggestions!!

@Avery Carl : I'm looking for a duplex first. I'd like to grow into more doors eventually, but I feel like a simple duplex would be the best place for me to start. I had been looking in the Greater Nashville area, but Murfreesboro is VERY attractive right now. I read an article not too long ago that said Murfreesboro is in the top 15 fastest growing cities in the US! My home town!! So, perhaps that should be my target city. I currently live in Murfreesboro and make an hour-long commute to North Nashville for work. I have been trying to get closer to work, but if it makes more sense for my financial world (particularly REI) to stay here, I'm willing to do that. The prices for duplex's that I've seen in Nashville have been around the $280K+ range. It's pretty tough to find any less than that in an area that I'd feel safe to live in.

@Jeff Greenberg : I'm still unsure as to how I can make myself valuable to anyone in the realm of REI. Also, I don't necessarily have a ton of time. Quite the opposite, actually. Work keeps me very busy lately, which is a double-edged sword. I make decent money, but I don't have much time to dedicate to much else on some weeks. My current "mentor" is a BP member in Nashville who has been prodding me to get started since I met him three years ago. I'm finally doing it, and that's a good thing, but I feel late to the party. (Better late than never?)

I agree that I need more capital. I also agree with your "what it" scenario. My girlfriend actually sent me an article last week stating that the market in Nashville is about ready to slump again. I've heard otherwise from other folks, but I know that it IS incredibly flooded (the market, not the river again... yet), and it certainly seems like it's ready to fall apart again simply because prices are ridiculous.

@Chris Jensen : Thank you for the well wishes! I need all I can get! I am VERY leery of putting all of my eggs in one basket. I've never had so much saved up, and I don't want squander it on more poor choices. I made enough of those with my money in previous years! I'm also leery of investing/partnering with strangers. Perhaps I need to get over that, and just make sure that anyone I might end up working with is well vetted. I do like the BRRRR strategy. It's all about finding that right property.

@James Jones :  Have you connected with people here on BP?! I'm ready for the hard work part. Creative financing is something that I have a very hard time wrapping my head around. I guess I don't have a solid enough understanding of how money flows to begin with. It is, most certainly, another part of the puzzle that I'm learning.

Thank you ALL for taking the time to respond to me! It really means a lot, and is a great testament to the wonderful community on here. Cheers to you all!!

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