I'm in the St. Louis area and I'm trying to buy my first investment property but not having any luck finding a property. I've made a few cash offers but none of them have been accepted. I'm not going to overpay for a property just to get my first deal.
So I'm looking at other financing options to possibly start looking at higher priced property. I have $40,000 cash so I've been looking at this price range so far. I've been talking to a few lenders about financing options but I get different advice from all of them. What is the best strategy for my situation? Do I find a house I can pay cash for with what I have or try financing first? I don't want to get in a situation where I spend all my cash and then I can't purchase anything for 6-12 months. I'm aware of the BRRRR method but I still think it would be a 6-12 month waiting period. With the BRRRR method, I will be out of cash right away. If I finance from the beginning, I could put 20% down and still have money left over to purchase another property with 20% down. The downside of this would be not having a cash offer.
Any suggestions or advice?
The downside with putting 20% down and then buying another with 20% down is that you'll be out of money. Sure, you'll have two properties but you'll be out of money and not able to go anywhere. With BRRRR it might take a bit longer but you can keep recycling your money over and over. And it isn't one or the other with either an all cash 40k property or finance a larger property. You could find a hard money lender or a private money lender. That way you can still make "cash" offers, rehab the property, and pull your money out via refinance once rehab is complete.
Thanks Ryan! I've thought about using hard money lenders and it seems like a good option. I believe that's the only way I'd be able to buy properties quickly. I've also talked to lenders about refinancing after using a hard money lender. I have a job with a decent salary which will add to the $40,000 that I currently have so it's not like I'll be completely out of money with no way to get more. I just didn't know if there was an advantage one way or the other. I think my only option may be a hard money lender.
Got any friends, family or co-workers that would like to invest at an 8% interest rate? It's a bit cheaper than hard money but you must keep it professional. Use the software here at BP to show them your plan/exit strategy and if it's sound you just may find a private lender or two.
Thanks Vince. I'm working on the private lending. Some of the capital I have now is from private lending and I was lucky to get it at 5% rather than 8%.
You need a loan my friend. with the 40k liquid you should be able to qualify for a deal in the 200k range depending on a few other variables. But what ever you do... Do not spend pay all cash for a property that needs rehab work, Get a loan that includes the construction budget and do it the right way
Thank Tarik. If I did have to spend the entire 40k, I have other options for paying for the rehab if needed. My biggest problem right now is finding the first property.
Hi @Sam Zes ideally you do not want to use your own personal cash. If you need to make a cash offer I would use a line of credit, private lending or hard money. If you also need funds for a rehab there are local banks in St Louis that will lend 100% on a construction loan with interest only payments.
You mentioned you are also having trouble finding deals. PM me your buying criteria. It may be a matter of connecting with the right agents & wholesalers.
Keep your own cash out of YOUR deals as much as possible, I learned this the hard way.
Definitely, keep your personal money out of it as much as possible! Also, if you get an interest only loan, be sure that you sell the property once it is ready and repay the loan in full. Interest only loans are only helpful for a short time! Otherwise, you are asking for trouble!
Thanks for all the advice everyone!
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