1. The loan broker is misleading you. unless you have great credit and are an experienced real estate investor, no lender will allow a owner second as substitute for borrower contributed capital.
2. Private lenders typically lend in the first position, not second or third. And they don't charge 4% interest, it's 12 - 16%, with 3-4 points at closing, and 12 month terms
3. If private investors put up the "down payment", then they want ownership equity, like 90%, IF you have found and put together a great deal, better than they can find on their own.
4. The expenses of running an apartment property include vacancy loss, maintenance, repairs, management, accounting, legal, evictions, depreciation, landscaping, make ready, utilities in common areas, extermination, insurance, property taxes, building code violation fines, permits, usage fees, security, management, leasing fees, etc. Always more than the seller reveals.
Stop reading crap like Rich Dad Poor Dad. The wealth of knowledge contained in those books can be summed up in one paragraph. If you don't get it after one reading, you are not ready to begin investing. Instead do the things that will give you a chance to really become a successful investor
1. Get a REAL education in real estate. Start with a basic real estate text book, or a basic real estate course at a local college or through a Realtor's Association. Understanding what real estate is, how it is valued, the theory of real estate ownership, and real estate law, will allow you to see each possible purchase with a clarity most amateur investors never experience.
2. Learn real estate finance. The basics, not the one out of a million crazy "creative" legally questionable Byzantine fantasies put forth by the gurus and their unanimously unsuccessful followers.
3. Learn real estate negotiating. Like what is actually obtainable in most transactions. And how to be ready when you do stumble across the rare "home run". There's nothing worse then discovering an opportunity to earn six figures on a quick flip (yes, although rare they do exist) and for lack of knowledge having to pass it on to someone else for a lousy $3k referral fee.
4. Optional - Get a job in the real estate industry. Best is a job with a REIT, real estate mutual fund, real estate equity fund, real estate debt fund, or private real estate investment fund. Next best is property management or commercial real estate brokerage.
5. Optional - Get a college degree in real estate ( Florida International University and University of Florida offer fully online degrees in International Real Estate and Real Estate Finance). Realtors University, run by the National Association of Realtors, offers a Master's in Real Estate. Over 200 colleges and universities offer degrees in real estate. Or consider becoming certified as an appraiser, or real estate counselor.
6. SAVE money so you will have a "grabstake" to begin investing with
From the vantage point of my 40 years involved in real estate investing, I offer these conclusions.
First, for almost everyone, a true education in business, investing and or real estate is required for sustainable long term success as a real estate investor. There are two exceptions - (1) people who out of sheer luck purchase property just before a large run-up in prices because of either inflation or the luck of being in the right place at the right time and hanging on to the property, can obtain a large degree of wealth without great knowledge or education in real estate and (2) those wanting to fix and flip single family homes can develop a nice business without the heavy education and experience I noted above. However, although the fix n flippers like to call themselves real estate investors, they are actually in the real estate business, they are not investing in real estate.
Real estate seems to be the one field where a large number of people are willing to believe that with just superficial knowledge, the purchase of a guru's mentorship program, the reading of a couple of books by authors who were NEVER successful in anything except selling books about how successful they were, that they will be able to achieve success as a real estate investor. This belief is so strong that they will incredibly believe this success can be accomplished with little or no capital investment. Even more incredible (and extremely sad), those with $40,000 saved are willing to spend it all (usually eagerly) on a mentorship program in which they have done no research and demanded no proof that the program has been successful, other than read some hand picked testimonials from the guru's students. Even worse are the people with no money who borrower $40,000 on their credit cards for the same mentoring program, with little chance of success. The reason I mention this is that books like RDPD are the introductory step in a continuous upsell leading to the $40,000 worthless mentoring programs I just mentioned.
In any case good luck whatever you decide.
