Help buying first deal with full-time job and no money down

8 Replies

Hello BP Community!

I'll jump right in: I would like my first deal to be a duplex/triplex (or even 4-plex) that I can use an FHA loan to purchase, and live in one unit while I rent the others out. I would like to use OPM for the down payment, so that going forward it might be easier to get others to invest in me. I am 22 years old and I have a 50+ hour/week job.

Finding investors on a first deal is not the easiest thing in the world. But what I'm struggling to understand is, once I find investors, how do I manage to pay them back, plus interest, in a relatively short time period? How does that even work, or how has it worked for you on your first deals? I have many other questions, but I wanted to throw this one out first. Help a newbie out! Thanks!

Any all-around advice is welcome too!

So some options to use other people's money are:

Hard Money lenders - They lend out money based on the strength of a deal. They charge high interest & points for a short term loan. If you have an amazing deal, you could maybe fix up the house and refinance to a conventional loan. Most hard money lenders do not loan to owner occupied though. If the person who borrowed money occupied the house and choose not to pay them lender back, it would be a legal headache for the lender to gt the property. Using an FHA means this method would not be the way to go.

Private Money - These are people that are willing to lend you money based upon whatever agreement you can both agree on. Professional private money lenders don't lend on owner occupied properties. Same reason as above. Other private money lenders can come from your circle of influence, such as friends and family. You might be able to arrange something with a friend or family member. Especially if they want to get into real estate.

Commercial Investing - It is possible to structure a commercial deal so that you actually get paid to do that deal. It's not easy and takes a lot of time to find and put one together. If this interests you, check out some books on commercial investing.

 If you can buy a property as buy and hold, you should have enough money to either put down on the property or pay monthly cost on hard money/private money loan until a refinance. If not, don't buy the property. Same with flipping property except make sure you can sell property before the loan is due and you make enough to pay back lenders.

Best advice I can give you is join a local real estate investor association (REIA). Go to the meeting, listen to the workshops, network with people, and buy some people lunch/dinner/coffee to pick their brain. The people in those meetings have valuable experience that can help you get started. Also, you'll find people that may want to partner up with you.

I hope that helps

Originally posted by @Caleb Griffin :

Hello BP Community!

I'll jump right in: I would like my first deal to be a duplex/triplex (or even 4-plex) that I can use an FHA loan to purchase, and live in one unit while I rent the others out. I would like to use OPM for the down payment, so that going forward it might be easier to get others to invest in me. I am 22 years old and I have a 50+ hour/week job.

Finding investors on a first deal is not the easiest thing in the world. But what I'm struggling to understand is, once I find investors, how do I manage to pay them back, plus interest, in a relatively short time period? How does that even work, or how has it worked for you on your first deals? I have many other questions, but I wanted to throw this one out first. Help a newbie out! Thanks!

My advice is probably going to not be what you want to hear. If you are working 50+ hours a week, you have within you the ability to save up a 3.5% down payment to purchase a property with an FHA loan.

If you don't have the ability to do that, then you need to seriously focus on your spending habits before you even think about investing in real estate. You have to be very focused on budgeting and money management to be successful in any business. 

Thank you both for your replies! Everything yall are saying makes a lot of sense. I am just recently starting to make good money in the job, so I agree that saving and budgeting correctly is a huge part of it for me. Which correlates with Alberto's reply, that I should have money saved up, and then pay investors from that set aside savings. I knew it would be a fairly simple answer, just wanted the extra input. I really appreciate it guys!

@Caleb Griffin - A few more tips - once you have the savings for the down payment, there no reason to use investors on this first deal. Being an FHA loan, they're really going to scrub your bank statements. If you're doing a side deal and borrowing the funds for the down payment and then paying investors back, they're really going to frown upon it (they don't want any of the down payment to be borrowed, and will question any large deposits coming into your account).

Also with a multi unit that I assume you'll be renting out, make sure you have cash reserves for the unexpected (evictions, damage, code changes, etc).

Good luck!

- Tom

That is awesome advice, Tom, I really appreciate it! I guess I hadn't thought about that; the bank not liking me using borrowed money. And I also suppose using my own money and being responsible with payments will prove myself just as much as using investors and paying them back. Great stuff to think on, I have a lot to learn!

Hi Caleb,

Definitely check out the podcasts here on BP. You can't put a price on the info at your disposal here. With that said, start hunting for deals. If you find a really great deal the money can be found. Start attending local REIA meetings and tell people what you want to do. A deal just might find you! Use the calculators on BP here to analyze the properties you find, they usually work well. I use the calcs here all the time for my clients.

Chances are you will find something at or nearer to market value. In that case plan to have 5-10% of the purchase price for down payment and closing costs, using FHA. It would definitely help to keep the credit cards balances as low as possible and many lenders don't want to see your debt to income ratios more than 30% and no large cash deposits or withdrawals, the bank will pick apart your statements like crazy! Have your 2 years of tax returns and a few months of pay stubs in a file ready to send to the bank when they ask. There is a lot more info to show you are a willing and ABLE buyer, so look around here and use the search tool find specific info.

Good Luck! Keep us posted on any deals you come across... 

Awesome input, Bill, I really appreciate it! I have been listening to BP podcasts religiously the last few weeks, only taking a break now that I got The Millionaire Real Estate Investor audiobook; I'm about 2/3 through it, and it seems to be a wealth of priceless info as well. I have a long commute to/from work, so I've cut back on music and I'm spending that time more wisely now.

I will definitely be on the lookout for deals. As the book explains, I need to have my criteria plotted out, and then get to know my market while keeping my eyes open for deals. Jumping into that full force now! Thanks again for the input.

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