I am finally debt free and looking for suggestions from ANYONE on how to break into the Real Estate arena. Below are some thoughts I had about the way to go about it. I currently have a pretty good credit score now but just a small savings of 10K with access to borrow up to another 60K personal.
1. Take a hard money loan and purchase a place to rent
2. Get a personal loan and purchase the property outright, BRRRR it and pay off the loan.
3. Use the BRRRR with the Hardmoney loan (only thing is no purchase track record)
1 - You NEVER use HM as a way of buying a rental unit. HML are short term and very expensive. They are only used for flipping.
2 - I doubt you would be able to get a personal loan large enough to buy all cash. If you did, it will still take you at least 6 months of seasoning so that you can claim that the money you are using for the purchase is not a loan. Then, another 6 months of seasoning to me able to do a cash out refi. Yes, this would be considered a COR since you would have used 100% cash to buy it.
3 - The HML would be way too expensive, and the cost of it would probably get you negative CF while it was still in play.
Option 5 - Learn how to buy using some form of seller financing:
a) Lease Options b) Seller holds paper and you make payments directly to the seller. This would require a property where the seller had no debt on the property...but in this day and age that's not that big of a problem.
Congrats on being debt free!! That's a big deal! I would look at doing one of the options with the BRRRR strategy as you can get your money back out and repeat the process. You can scale and build wealth this way. Good luck!
@Paul Stamm thats funny that you are from Indiana and I'm actually looking into investing in the Indianapolis area. Just was doing some virtual driving for dollars in that area. Maybe we can chat about areas and see what comes of it.
1 - You NEVER use HM as a way of buying a rental unit. HML are short term and very expensive. They are only used for flipping.
2 - I doubt you would be able to get a personal loan large enough to buy all cash. If you did, it will still take you at least 6 months of seasoning so that you can claim that the money you are using for the purchase is not a loan. Then, another 6 months of seasoning to me able to do a cash out refi. Yes, this would be considered a COR since you would have used 100% cash to buy it.
3 - The HML would be way too expensive, and the cost of it would probably get you negative CF while it was still in play.
Option 5 - Learn how to buy using some form of seller financing:
a) Lease Options b) Seller holds paper and you make payments directly to the seller. This would require a property where the seller had no debt on the property...but in this day and age that's not that big of a problem.
All that money you've been using to lay off your debts each month will now go toward buildi your downpayment money. Before long you'll have a sizeable amount to out down for a purchase. Continue building that downpayment for now.
Save more so you have 20% down payment. As Eric mentioned, you've been paying off all of your debt, take the money that you've been using for that and add that to the money you're already saving. Don't try to buy the cheapest place, but a good place (eg starter home) in a good location. Talk to your bank to find out how much you can borrow.
Don't do any hard money loans as their interest rates are going to be higher. Buy with a regular mortgage (20% down for a rental).