How to go from deal #1 to deal #2
I finally took the plunge and purchased a buy and hold rental property in Oct 2017. Rehab went a little over budget. Rehab took a little longer than expected. Took a little longer to find a tenant because I believe I slightly overpaid so I wanted slightly higher rent than the area calls for, cash flow ($100) is lower than I expected BUT... I did get it all done and I have a tenant which leads me to my question.
How do I get money for my second deal? I used up most of my cash reserve for the down payment. I have some money in my 401k and I can get a loan against it for a down payment on my next property. Maybe I can find some private money, but my question is how do I pay for the private money or pay my loan back? The numbers below are an example. It cash flows $180 after everything, but if I did 401k loan, it would cost me $340 a month to pay back that loan ($20,500 over 5 years at 2.875%). So I have loan payment for $340 - $180 leaves me with paying $160 a month for 5 years. Do I have to find a deal good enough that it cash flows above what I would need to pay for my loan (in this case it would need to cash flow $340)? And the answer may be to save up the down payment while I sit on this first property. Just wanted to get others opinions.
Example numbers:
Purchase price: 70,000
Down payment: 14,000
Estimated repairs: 1,500 (figuring close to rent ready)
Closing costs: 5,000
Rent: 1,000
P&I plus hold backs: 820
Cash flow: $180 (10% COC)
So all in for me is : $20,500 (down payment, closing costs, repairs) which I don't have right now.