How do i get an investor for my down payment?

Question

Hey guys I’m looking for advice. My wife and i have been talking about buying our first multi family property and we are looking for an investor who would fund the down payment and possibly some rehab if needed. If anyone is interested please contact me. I will need to know all the details on how paying the investor back works. This is our first time reaching out so any and all advice helps!

Bruce Woodruff · Answer

What are you bringing to the table?

Where is your skin-in-the-game?

Bruce Woodruff · Answer

@Jonathan Greene is correct. Your construction experience is a plus for sure, but is it enough to get a stranger to give you a large sum of money? You will probably have to offer them better than a 50/50 split on returns and profits.....

I used to command a 50/50 split but that was with decades of experiences, multiple licenses and contacts that would make your head spin.....

Never hurts to ask though, put yourselves out there and keep pushing, you might find someone willing to take a chance on you....

Jonathan Greene · Answer

There isn't really anything worth giving money in your ask. Why would someone give you the money? The construction experience you have is good, but are you a licensed contractor and electrician able to pull and close your own permits? That would be a plus, but still...if you have no properties, no experience as a landlord, and no capital, when you ask for an investor, you just want money and have not much to offer over others who can do the same. What are you willing to give them for the downpayment?

Kyle Mack · Answer

Well property management we have no experience since this is our first investment property! But, my wife is a realtor so we have a some pretty good mentors since her co-workers have experience with rentals.

I have been in the construction field for going on 8 years now and have 4 years carpentry experience and 4 years in the electrical field. I have remodeled my past 2 homes completely by myself so i have learned a ton over the past few years!

Dan H. · Answer

Managing and rehab/construction is something I can hire someone to do for far less than what would be required to acquire a decent multifamily property.  Why would I decide to share the profit (equity split) when I can simply hire someone to do these tasks?  This is especially true seeing that I could hire licensed PM and licensed contractor that would provide additional protection over unlicensed PM or handyman.

What is harder to hire out is finding a great deal.  If you found a property and got it under contract that was an outstanding value, you would have something of value to offer.  This may present your best opportunity to find an investor willing to provide you an equity share.

Similarly if you found a great deal property, you may be able to find someone to provide you a hard money loan (HML) primarily on the potential return.  This would be challenging at decent terms due to your minimal experience.  HM Lenders want confidence that you can perform and this confidence is mostly due to experience.  With minimal experience, the HML will need to compensate for the additional risk which is accomplished by providing worse loan terms to the inexperienced investor.

I realize this is a Catch 22, you need the means to get experience and you need experience to have the means.

Find the killer deal and I suspect you can find an investor to help you on your RE journey.

Good luck

Bruce Woodruff · Answer

What is your experience with a) property management and b) construction....?

IOW, thinking like a money person, what would make me want to give you money over someone else?

Tim Delaney · Answer

@Kyle Mack you really have to put yourself in the investor’s shoes and ask what they stand to gain and why they need you. I’m not trying to be mean, but if you don’t have skin in the game and you have no track record on something like this then why would anyone want to take a risk when there are other investment options. That said, I don’t know for sure that you are not planning to put some capital in as there were not a lot of details. Shoot me a message with some more detail if you’d like.

As for the capital gains on your flip, I would also consider the time value and velocity of money. I don’t advocate for paying more taxes than than you should, but if you had an extra $83k today vs an extra $100k in a year it may be better to take that $83k today and invest it in your next deal to speed up your process. With 7% inflation that $100k you will have next year is only $93k of purchasing power (yes, I realize I’m not factoring the potential increased profit you may have in a year). Would that $83k be good enough for a low down payment on a 2-4 unit that you can house hack?

Nicholas L. · Answer

@Kyle Mack if you need money for a down payment... does that mean you have minimal to no savings?  What happens if you have a large repair occur?  Can you wait and save up enough to do some kind of live in flip / live in BRRRR / house hack?

Kai Kopsch · Answer

@Kyle Mack starting RE investing without having access to funding is very difficult because if something goes sideways you need to have funds to recover. Besides the traditional Funding, I would recommend building relationships with Banks and Credit unions I know a lot of investors who started out with a personal loan from Navy Federal or AMEX and house hacked their way up. In the previous posts, you can see it all about your track record in MFH investing, after you have done your first 5 to 10 small SFH deals successfully the door to funding will automatically open. I hope this helps! Good luck with your journey!

Markis R Kelly · Answer

If I was you I would take out a heloc on my property (if you can) and then use that as the downpayment. Right now people should be unlocking the equity they have with the way the market is going. But as far as finding some one to invest in the down payment I would look to family or close friends that have that type. I also use my own credit as I have well over 500k worth of it and I can do a balance transfer with no interest for a year to cover the downpayment if need be.

Good luck if you have any questions about credit cards you can do that with reach out to me via pm.

How do i get an investor for my down payment?

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