Funding my First Duplex

[Nia Booker]

Hey everyone! I'm excited about buying my first home as I pursue a duplex here in Houston to launch my real estate journey. I've listened to many of Dave Myer's webinars now that walk through Finding Deals, Analyzing Deals and Funding Deals. Well, as he stated, it's the funding phase that becomes more tricky. I'm exploring different funding options and would love advice on using other people's money (OPM), leveraging business credit, or possibly borrowing against my 401k to keep more of my liquid cash. What strategies have worked for you, and what should I watch out for? Thanks in advance for your insights!

[Jason Wray]

Nia,

When it comes to funding options there are Pro's and Con's when it comes. When its family and you have time to pay it back or its gifted its okay. If its OPM and its a loan or comes with a shorter term payback or requires a Ballon/High rate. Then it can be dangerous in regard to several factors. Loans typically get paid back on a refinance or buy out period but if the property fails to gain enough equity within that period of time it can be a lost deal and painful.

I would advise you to look into traditional or Non/QM financing where you use your credit score or income to buy the home. DSCR for example has less requirements like (No income, No taxes) it uses rents to qualify. You also have bank statement loans where they use 12 or 24 months gross deposits of a personal or business checking account.

Buying a primary home is the fastest and less expensive on the pockets to then transition into a rental in as little as 6-12 months. You only need 3% down for single family or 5% down for 2-4 unit multifamily. Down payment can also come from a DPA program or a gift and you can ask for a "Seller contribution/Concession" to cover closing costs.

401K in most cases can be used without penalty if used for a primary home if not take it out regardless and pay the tax if it allows you to buy a good deal.  I fyou ever have any questions feel free to reach out.