Does anyone have any ideas on how to build capital?
Hi, I'm a seasoned landlord and after 2 years of renting my first home I decided to study real estate investments. 5 years later here I am trying to build my portfolio but I'm being stopped by the fact that I just don't have enough capital saved. I really don't understand how some people get Multi family Properties & I'm stuck trying to get the 20% & LTV of a single family. I work so hard at this and it gets frustrating at times but I will not give up on my goal!!!!!! I have double digit capital but just not enough😣
Have you tried borrowing private money? That has worked well for me. Ask family, friends, co-workers, people at your church, your attorney...everyone!
How much equity do you have in your first rental? Do you have any paid for vehicles? You can get 1.75% interest on up to 130% of the current NADA value of the car from MobilOil. Borrowing money from family at low no interest.
Other than that, trim the fat on your expenses/amenities and save extra from your regular job at the same time saving the CF from the rental. It will happen.
$15,000 Equity first home , no friends 2 borrow from, but I do own 2 cars I will check into that. Borrowed from mom 2 start my first business. Thanks Guys!
Updated over 1 year ago
I'm always open for any helpful comments fellow members!
@Cheryl Tatum I do share your frustrations Cheryl, but have learned myself that your actions will be guided by your goals. If you are buy and hold (rental) oriented, then understand borrowing from the aforementioned sources (none of which are bad ideas) will linger with the mortgage you take as well. If you're wholesaling and flipping, then borrowing capital against your motor vehicles will likely be paid in full after the sale of your property. Additionally, you should have capital leftover to invest in the next property! It is slow at first, but moderation isn't ALWAYS a bad thing here. Best to ya Cheryl!
I can only tell you what we did to get our first two rentals. For the first we took out a HELOC on our primary for the down payment. We did a lot of research on the property but we didn't know that prices and rents were going to increase so much, therefore is was a lot better investment than we originally thought. We made more than minimum payments on the HELOC. Almost 2 years later we refinanced the first rental with a cash out refi, took money out to pay off the HELOC while still cash flowing pretty nicely. Then we used the HELOC again for the down payment on the second rental. Now we are paying that off with the rental income from both rentals. Hopefully we can continue this process for future rentals. It does help that we have a fair amount of money from our paychecks to pay extra on the HELOC. It snowballs for sure.
It is pretty addicting having rentals for us. We absolutely love providing quality homes for renters all while making decent profit every month and so far (hopefully continuing but not counting on) equity in the home. We have great renters that we are firm with but more than reasonable. We have found with our limited experience that you should trust your gut and treat others how you would want to be treated.
I know that there are other ways to finance the down payment but I would caution borrowing from hard money or friends or family. Like @Gerald Miller stated, if you borrow short term money to buy a rental (which is slow wealth building) without having a solid plan to pay it back quickly it increases risk in my opinion. Personally, our income allows us to pay back the HELOC pretty quick which is why we chose that route.
The other thing that we have not done but may be an option is owner financing, just make sure the terms work for you.
Not sure your future goals but it is our opinion and experience that rentals may start slow but if your goals and personal spending are aligned right, then it snowballs and you reach your goals faster the longer you grind. Stay focused and happy investing!
Not sure if this was any help at all but this has been our experience.
@AdamSmith Thank you! I need to hear stories like this, they help me generate ideas to achieve my goal!
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