Personal Loan a good method?

3 Replies

Hi, just over two months ago I closed on my first deal.  Two bed two bath condo in downtown KC MO.  I was able to buy at a small discount and quickly get it rented with a property manager and am cash flowing $170 a month, I don't even spend 15 minutes a week on it.  This first deal is going just as planned, and it feels great to actually be in the game now!  Ok, here's my question:

I don't really have enough $ to do another deal right now. I can partner, use hard money (I could cover the origination fee), or some other creative method. Also, I found out through SOFI that I can get up to 100K at 9.5% on a 7 year payback. I could use this to make down payments on multiple properties, or I could do a downpayment plus rehab costs on any variety, SFH, multi, etc. Of course I could do a flip and if it didn't sell rent it (Brandon Turner method lol).

However, I would be 100% leveraged if I used the personal loan from SOFI to cover any down payments, plus what I'd owe on the mortgage. May be tricky to get a property that would cover the loan payments, personal and the PITI of the other loan, plus Capex, management, and all the other expenses.

Who out there has in some way financed 100% of a deal, or borrowed a personal loan like this?  How did you make it work, and is this a strategy you would repeat?


Originally posted by @Antoine Martel :

I would recommend taking out a personal loan to yourself. Sometimes you can do this out of your 401k or IRA plan. And you can charge yourself 0% interest.

Antoine, this information is incorrect. IRS rules do not allow for a loan from an IRA. It is possible to take a personal loan from a 401k, but not interest-free.

This can be tricky and a gamble. 

I have done no money down deals 2 ways

1.) Find a great deal, you have to really know the market and know what things will appraise for, get someone to hard money lend you the entire purchase price. Buy the property for cash, turn around and instantly refinance the property knowing it will appraise for 20% more than your purchase price, the bank will stroke you a check for the entire amount you bought it as and you can pay back your lender. 

Example: I bought a 3 duplexes for 160k, I got 2 people to lend me the money for 3% for 30 days, and 4% for 45 days. I got the 160 bought the property with cash, as soon as I closed on the property I called a bank to refi the property, after the appraisal, income approach (each unit rented for 425/piece or 2550/month) the properties appraised for 225k. The bank stroked me a check for 80% which was 180k I paid my investors back 160k plus 3% (4800), closing costs were around 3200 and I walked away with 3 duplexes and 12k in hand. 

2. Find a great deal and find an investor to fund the deal. Give them equity or a guaranteed interest rate and fund the deal that way. The numbers have to work with paying the investor their cut, whether its a equity share or flat interest.

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