How did you fund your first deal?

Question

I was hoping to get some stories/ideas about how people are funding their FIRST deals. This seems to be where I am getting tripped up (at least in my own head). I don't make a lot of money in my 9 to 5, and I don't have a big pile of cash sitting somewhere to pull from (that would be why I'm getting into Real Estate investing). I've read some blogs & forum posts, listened to several podcasts, and got some great ideas, but I really want to know my options as thoroughly as possible.

I'm interested primarily in buy-and-hold.

I'm interested primarily in buy-and-hold.

Sam B. · Answer

I worked my ass off & saved money.  With all the talk about financing and getting into the game with as little down as possible, I think hard work and frugal personal living is often overlooked.  I worked long and hard for my "pile of cash".

Account Closed · Answer

During the boom, while researching land, I discovered that a large master planned community had been approved out in a rural area of Arizona. It would be self contained with homes, business, shops, golf courses, ect... So I purchased 160 acres next to the development with a six month close, and/or nominee, small earnest money deposit, and at least one out. My plan was to markup and sell 3/4 of the parcel and keep 40 acres for myself free and clear. After the development was complete, the value of this land would increase tremendously.

I began to market the land, and immediately found a guy who wanted to buy it. But he wanted all of it, or none of it. If I accepted his offer, I would make a bigger pile of money than I had ever seen, and in just few weeks. But I was in love with my fantastic, next to the MPC, at the base of a mountain, elevated, saguaro and ocotillo studded, good water, access, power nearby, future cash cow land. So I turned him down. Soon after, cracks started to appear in the market, investors stopped buying land, prices plummeted, and the development was canceled. Fortunately, I exorcised an out, and was able to escape with my earnest deposit, but I left a small fortune behind.

Lessons learned:

1. Don't fall in love with your real estate.

2. Sometimes it's best to grab the money that is on the table now, instead of speculating on larger future gains.

Jeff J. · Answer

My story is funny.

I had a thousand shares of pre-pre-split apple stock that had been meandering around $12 for two years.  I cashed it in for about $13/share and bought a rental house that has lost $20k in value.  Today that stock would be 14,000 shares @ $90/share.

However, the experienced I gained with that house allowed me dive into multi-fam which has also been a very good investment, and the difference with my real estate is that it cash flows like heck and I own all the growth potential.

Amanda Hensley · Answer

We worked and saved for the cash for our first property as well.

James Wise · Answer

@Omar Parks welcome to the site.

Bryan L. · Answer

@Jeff Rossman Here's how I got started.  First, I bought a house to live in.  It was an REO and needed a little work, so we got a good deal on it.  Had no idea in the world about REI at that time.  But we did the rehab which added value.  Then I went and got a HELOC on the equity and used the HELOC to start investing and flipping.

Omar Parks · Answer

@James Wise, thank you :)

Omar Parks · Answer

@Jeff Rossman. I did the same thing as Brian except I didn't have the equity for a HELOC. I sold my SFH a few years ago (short sale) and am now moving into a duplex in August. I'm trying to find private lenders and owners that are willing to offer financing to get into other properties. It seems the hardest thing is to come up with a system : )

How did you fund your first deal?

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