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.

@Colin Leach First, congratulations on taking the plunge. Many never do! Now, first thing first, you should outline what you think you could better on the second deal based on what you learned from the first deal so that you stay on budget and time. This lessons learned step is absolutely critical before moving onto the next deal, especially if you're still thinking of how to raise the capital. Three options to consider: • Get an appraisal for the first deal to see if there is room to pull out equity • Lease option your first deal when the tenancy expires [get the 20k from that tenant] - Patience can be good • Do nothing and save for the next one With other peoples' money, there should be a certain level of financial stewardship and fiscal responsibility that come with it. Consequently, you should make sure that you are confident to take that leap into the realm of using OPM. Hope this helps. Goodluck. Thanks! - Ola

@Colin Leach we're in very similar positions. I just acquired a duplex to house-hack in January, but after learning more through reading/listening/observing mostly BP content, my deal seems average to me. It could be great depending on how the market moves, but we'll know with time. Like you, I'm also finding it difficult to be patient and am yearning to buy another. But, I think as you noted, we've both come to the same conclusion in that : • There's a lot to be learned • Being patient will pay dividends • As we wait, we can be diligent in finding great properties that meet our criteria. • And, if we can't be patient, we'll find methods of being financially creative to acquire another sooner, such as what @Cameron Whitehead and @Varinder Kumar noted. This is a great time for us to learn the tough lessons of land lording, refining our criteria, searching for awesome deals, and learning about how to creatively finance. Congrats on getting in the game, and let's keep forging forward!

Precisely. You need to make sure you have a good realtor that knows the area, comps, etc. Start building your team up today. You've already learned a lot from this first deal.

How to go from deal #1 to deal #2

Joe Luciano

Rapid City, SD · Member since 2013 · 10 posts · 0 votes

8y

This is a great question and I’m interested in seeing some experienced members give advice on this. I have not taken the plunge yet and quite easily could be in the same position after my first deal.

How to go from deal #1 to deal #2

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