I am new to real estate investing and am trying to understand exactly how to finance my first deal on an investment property. I would like to invest in property hat I can rent as a short term rental, but want to find a creative way to finance the 20% down. Any feedback would be much appreciated. Thanks.
Hi @Allen Carpenter ,
Assuming you are not going to owner-occupy ("househack"), two possible ways would be Seller Financing and Partnering.
(1) Upon finding an investment property that would cashflow well, submit an offer to the owner but clarify you would need them to finance the deal for a period of time, start with 2 years. Basically, that means instead of going to the bank and getting a loan, the seller would deed the property to you (you then legally own the house), you'd pay the seller a monthly payment for the loan they offered you, and then after 2 years you would either pay the seller the remaining loan balance or you get a bank loan on the house and then the bank would pay off the seller.
(2) Partnering takes a little less work the seller financing. While looking for deals, you also reach out to current investors and offer them a partnership. The conversation would be similar to, "Hey Investor, I'm looking to do my first deal. If you provide the down payment, I'll do all of the work on acquiring and operating the investment, and we split the profits 50/50."
Excited to see how your first deal goes!
hi @Nathan Platter ,
First of all thank you. These are 2 very good bits of information. To follow up I have a few questions and replies.
1. You are correct, I do not intend to owner-occupy.
2. How common is it for sellers to agree to finance the house directly to the buyer? This sounds like a very good option, but I would like to get a little bit more information on the ins and outs of this
Hi @Nathan Platter - meant to directly mention you in the above reply. sorry.
HI @Allen Carpenter ,
It honestly depends on how good you are at communicating the value of Seller financing. It's helpful if the seller wants to delay/reduce their tax liability, or if they want to collect income from the house rather than take the lump sum today,...
The answer is an automatic no if you don't ask.