Using my own money as cash down, or other options?

Question

I currently have enough in savings that I can fund roughly two down payments plus some rehab cost. I am trying to decide if I should go ahead and buy two, buy and hold properties and start cash flowing, or if I should use other methods to fund them and hold on to my savings? I currently own my primary residence, which is a single family, the markets I am looking at are fairly hot, with anything with a decent price goes under contract within the week of being listed. I like the strategy of buying a flip and using the profit as a down payment on a rental, but I am also worried about the coming down turn in the market, and how the timeline falls with getting a flip now and trying to list it as the market is slowing down. I am wary of private and hard money lenders, as I have never dealt with it. Any advice is greatly appreciated!

Jacob Sampson · Answer

I think it is fine to use your own money to buy but I wouldn't sink all your money into 2 properties.  Buy 1 and learn the game then go ahead and buy the second if you decide buy and hold is for you.

That being said, don't buy into a hot market.

Clint Diven · Answer

Thank you Joe, I was considering this, as a way to continue to fund deals as time goes on. But was wondering if I was making a mistake of not buying a rental and starting the cash flow, and using time on my side of getting the loan paid off. But I definitely see the benefit of your strategy and how it can compound my cash and grow it so that I am only using profit as DP for rentals and these allows me to grow my cash while also funding rentals without losing my seed/cash.

Joe Villeneuve · Answer

Never ever SPEND you seed money (cash).  Use the same money many times over though.  Flip your seed money over and over...reinvest the profits back in.  This will grow it...then, at some point, continue to flip the seed money, but this time only reinvest the inflated seed money...and spend the profits on 20% DP's on your rentals.

As long as you don't spend the inflated seed money, the seed money will continue to generate profits to be used for new rentals DP's.

Clint Diven · Answer

Thank you, I was leaning towards that. Getting my foot in the door of the owning and managing my own properties, but I am very concerned about the state of the market across the country. I am not ready to invest in a market that I can not manage on my own. I have some experience in the rental game, I owned a managed a single family for several years, but made the mistake of selling instead of refinancing it. Would you suggest waiting until the market cools off, or to go ahead and get a property while interest rates are good and have more time on my side?

Using my own money as cash down, or other options?

Most Popular Reply