Are you saying you have $10k saved up? I’d go fha 3.5% down. Multi family. You’ll need to live there for 12 months. Well worth it. Ask seller to contribute towards closing costs, even if it means raising offer price.
Not sure where you are located but I would say go to the area in town where you can buy cheap properties for cash. Purchase it for $10k and take your time and rehab the property. Get to know every aspect of buying, rehabbing and renting out. Once you have finished you first property analyze it. If you decide to do it again you have been bitten by the bug. If you pack up and run then look at the things that you didn't like to do like construction or property management and sub that out. After that is complete brrr the deal and get ready for your next property.
Are you saying you have $10k saved up? I’d go fha 3.5% down. Multi family. You’ll need to live there for 12 months. Well worth it. Ask seller to contribute towards closing costs, even if it means raising offer price.
I took 5 under contract with 0% down, 30 year amortization, 5% interest, no balloon.... Seller financing. I have to admit though. One of the 5 houses is a gut rehab so my rehab on this property will be my skin in the game.
In April I did a 170k 4-plex with 15k down - also seller financing 5% interest, 30 years no balloon.
Don't be scared to ask when you negotiate a free and clear house, if the seller is willing to carry the note. Some will require a 3-5 year balloon but that's no problem either. If it cash flows well, give the seller the FMV, put as little money down as possible (to decrease your risk), make the mortgage non-recourse. No risk, huge upside.
@Joe Villeneuve I’m looking in the Nashville area it will be hard to find a house for 50k . I was wondering if a particular bank will give a beginner type loan.
Too much info to cover. Google fha loan requirements and qualifications. And find a local mortgage broker to assist you. Basically, you may qualify for 3.5% down payment on a 2-4 plex. Mortgage broker can help you with a lot of info and help you find the best terms for a loan. I bought a $260k duplex with about $7k out of pocket a few years back.
@Joe Villeneuve I’m looking in the Nashville area it will be hard to find a house for 50k . I was wondering if a particular bank will give a beginner type loan.
Then look in a different market...where you can buy $50k houses.
Wels Fargo is currently doing a loan for only 3% down. You could use that to buy a small multi and house hack. That may be something worth looking into.
@Warren Sawyers Unfortunately I don't. I'd recommend giving them a call or going in person to find out for sure. But don't forget there are a lot of lenders out there that will do similar loans. You just have to do a little digging and shop around to find them. Also, it's not all about credit score. They look at you as a whole picture including your debt to income ratio, loan to value, etc. Check out this post biggerpockets.com/bankfinancing There's a lot of good information in there for understanding underwriters and financing.
@Michael B if the seller finance the deal, how exactly does that work? You just pay the seller going forward or do you have to go through a 3rd party. (Trying to understand) thanks.
There's a lot of different ways to house hack. The most popular way is buying a small multi family (2-4 units) and living in one of them. This means the other renters will hopefully be paying most, if not all, of your mortgage. So you basically be living for free while building equity at the same time. You can also do this with a single family home and just rent out to roommates. It all depends on your personal situation. Check out this article that goes more in depth https://www.biggerpockets.com/...
It depends, are you looking to buy rental properties to hold, or buy properties to fix up and flip?
With 10k I would go for an FHA loan on a multifamily like was previously mentioned. Live in one side, rent out the other, fix it up if need be, and start saving for the next one. That's the more conservative approach, and many will disagree with it. There's a little more red tape with an FHA loan, but research it and speak with lenders to see if it's right for you.
If you’re wanting to flip you’re going to need private or hard money lenders to fund the rehab. I don’t have any experience with flipping, and very little with rehabbing my own properties, so I’m not qualified to give much advice on that.
Either way building a solid team is key so start networking and learn as much as you can about whichever path you choose. Pick a niche and stick with it until you’ve mastered it. There is a ton of ways to make money in RE and it’s easy to get distracted. Stay focused, learn, network, utilize BP, and be persistent.
@Michael B if the seller finance the deal, how exactly does that work? You just pay the seller going forward or do you have to go through a 3rd party. (Trying to understand) thanks.
It's actually pretty simple don't let the big wording scare you. No 3rd party involved.
You are basically just buying a house on an installment loan (just like when you buy a car with a loan). The seller of the house will become the mortgagee just like a bank and he will be protected by a mortgage agreement, promissory note and (sometimes) an assignment of rents contract. I have been very successful negotiating these kind of deals with older sellers that have portfolios that are under performing and that would like to hold on to the cash flow. These sellers are home runs. You can take over their portfolios on seller financing and often give the seller the same net income that they had when they were still active landlords. Your underwriting ability will go a long way here - use @Ben Leybovich depreciation schedule and explain to the seller why they are not receiving the income they think they do. Alternatively you can also use the Fannie Mae underwriting guidelines to determine the actual net income (75% of gross rents - PITI(M))
The advantage for the seller here is, that he will receive (almost) the same income without any volatility. A true win-win without any stiff arming.
The things you will want to negotiate are: Down Payment, balloon (no/yes/how long), interest rate, amortization. The beauty of seller financing is that you can make the numbers work for you AND the seller by adjusting these 4 metrics. For example if the cash flow is sufficient but the cash on cash return is not, negotiate a lower down payment. If the seller doesn't want to give you a discount, agree to his price and extend the amortization period and/or the reduce the interest rate to lower the monthly mortgage payments. If you agree to the sellers price, keep your exit strategy in mind especially if you have a balloon coming up - it has to be within reason. Once you reached an agreement with the seller, enter into a regular purchase agreement and lay out the terms in the agreement.
Knowledge of how to "bend" transactions this way will be one of your most powerful tools in negotiations. You will be able to make pretty much any deal work, even when other investors back out. Furthermore, you can use this kind of deal making with any transaction in your personal life - boats, airplanes, cars. Keep in mind that the asset has to be owned free and clear.
After you entered into an agreement, connect with an attorney that has done these types of transactions before. The attorney will create the promissory note and the mortgage agreement for you (depending on the state) and look over all the paperwork and the assets that are being purchased. The seller might require a assignment of rents agreement in case you default. I wouldn't mention that proactively. Make sure that there is no personal recourse in the agreement/note and make sure that the issue of due on sale in the promissory note was addressed. If "due on sale" is not mentioned then courts currently rule that a "due on sale clause" was to be assumed - counter that by stating that the loan will not be accelerated if you transfer the property. This will allow you some further financial jiu jitsu like reassigning that seller financed deal at higher rates to another buyer.
Lastly, a little motivating story for people that think these kinds of transactions are not common. In May of this year I was contacted by the SVP of an invitation only private bank in Beverly Hills, CA. The SVP knew about my business model from a friend of mine who I wholesaled 11 buildings to. He explained to me that he had a client that had 10 days left to complete a 1031 exchange. They needed to leverage at 20% and they needed 1.7M in assets. It took me ONE weekend to put a 16 unit multifamily and 14 single family houses under contract. All on seller financing, 20% down, amortized over 30 years, interest only - 6%, balloons in 3,4 and 5 years.
Please don't hesitate to reach out if you have any questions.