50,000 dollar loan when starting out?

Question

Hello! So I recently found a deal that could be a good property for house hacking if I just got a 50,000 dollar loan but I'm worried about private investors or banks not trusting me with their money. Is there anything I could do to look more financially reliable besides have a job or do my homework?

Dennis Liu · Answer

Idk what number it was, but the podcast is the BiggerPockets podcast

Nathan Gesner · Answer

You could actually put the numbers on paper so they can see your plan in black-and-white. Show them how you determined the value of the property. Show them what kind of returns you can expect, how you will find tenants, your contract to keep tenants in line, etc.

If you have a strong relationship with someone, they can probably take you at your word. Everyone else will want to see it in writing.

Eli Rollins · Answer

@Daniel Kong @Dennis Liu thanks guys this was really helpful! What podcast were you talking about Dennis?

Daniel Kong · Answer

Banks look at two main things when deciding to loan you money.

1) Credit Score (You can sign up for a free site to look it up - I use credit karma)

2) Debt to Income ratio. Basically take any monthly debt - auto payments, student loan, mortgage, credit cards, and divide by your gross monthly income. Every bank has a diff allowable percentage they feel comfortable with. Then you would add the monthly payment of the loan to your debt and recalculate that percentage. Something below 45% typically would be good.

If those are far off, then your options are asking friends/family, or having someone else cosign with you.

Dennis Liu · Answer

I remember on the podcast they mentioned if it one of your first times, you could

1. put some skin in the game(put up a bit of money)

2. ask your friends and family for the money( raise it yourself)

3. get someone to be a guarantor for the loan

Or if you have some history of 1 or 2 projects you've already done that should help a lot