Yeah but how much capital do you need?
Hello,
I am new to REI. I am interested in the buy and hold strategy. I bought a home in 2020. I do not have the capital to buy another property myself. When raising capital, do you need enough $ for the entire price of the home + fees + rehab up front? Or do you just need capital for a 20% down payment and use your LLC to get a loan from the bank for the rest? Any input appreciated!
Ryan
If the home does not need remodeled you can get a conventional loan from the bank and you will need to put ~25% down.
If the home does need remodeled you can get:
-A hard money loan from a hard money lender
-A private equity loan from a friend, family member, or acquaintance
In either of these cases, you usually will need to bring around 25%-30% of the purchase price. The lender funds the rest of the purchase, and a lot of the time they will fund 100% of the remodel.
There are ways to do deals with none of your own money. Entire books have been written about creative financing options. I'm just sharing the more common strategies, which do require some of your own skin in the game.
Hi @Ryan Friend, it depends on the strategy.
If you are doing a BRRRR or fix and flip, then you will typically need to put down 10-20% of the purchase price + rehab.
If you are buying an STR, you will typically need to put down 25%.
If you are buying an LTR, you will typically need to put down 20%.
If you are buying a house hack, you will typically need to put down 3.5%.
These do not include closing costs which are typically another 2-4% of the purchase price.
Hope this helps! Let me know if I can be of any assistance.
Thank you both!! Are there any books you’d recommend me check out? There is so much information out there.
You might start with any of the Bigger Pockets published ones. I've read a few and they are informative and for the most part skip the hype/sales pitch...