That didn’t go as planned!

152 Replies

I reached out to a lender and I was told I had to have capital of my own. I thought you didn’t have to have capital? He told me any lender is going to require me to have capital. He basically told me to save up some money and try again. It could take me a few years to save up that kind of money. How the heck am I supposed to get started with no capital. People make it sound like people just hand over money to help with funding a deal but I’m just not finding that to be true. Anyone have some real advice on this? Or am I just not looking in the right place for funding? Help me get creative!

@Branden Sewell what kind of lender did you speak with? Any traditional lender is going to require that you have capital of your own. One of the factors lenders use is called your Debt-to-income ratio. They want to see how much money you have and have saved up. Did you speak to other lenders? What kind of strategies are you pursuing?

@Dan Barli I am thinking long term. I would love to start with a duplex. Live in one side with my wife and rent the other. But I just don’t have the kind of capital needed for a down payment on a duplex. Not too sure what my options are. I would rather do that than buy a single family home. I have my own business but only have one year under our belt. So we are basically working with my wife’s income. We got pre approved based off her income for a conventional or FHA type loan, but to get a duplex at the price we are pre approved for it just wouldn’t make sense. Unless we found some kind of miracle deal at $200K. Any advice given our situation?

Unfortunately @Branden Sewell you'll have to get that other year under your belt so you can use your income as well. Keep saving until you can get the down payment for a duplex. I believe you can get an FHA loan with 3.5% down on a duplex. What market are you looking to buy in? (I'm guessing Orlando, but figured I should ask)

Yes, 3.5% down for FHA loan. But, there is also FHA 203k loans. You'll still need 3.5% down, but you can borrow up to the cost of rehab as well. It's more paperwork to be sure, but perhaps you could get into a duplex that needs some work, but still borrow the money to get the work done. You could also get the down payment gifted to you, from a relative perhaps? They would need to sign a gift letter for the lending institution to honor where the money came from.

@Anthony Wick From what I understand you can’t do a 203K loan if you plan to live there. My wife and I currently rent and we are trying to get out of that situation by house hacking a duplex or something like that. Already went the route of a relative and that won’t work in my situation. Don’t have a relative with that kind of money.

Most people who tell you that people are handing over money to help fund a deal are trying to sell you something. This is often preached but very rarely practiced, especially to someone with no experience. Unless you have a rich relative that strategy is bogus. 

Your best bet is to put in the time and effort to source deals and partner with someone who has money for a 50/50 split. You have to give up half of the project, but you will gain valuable experience. 

@Nick C. How would a 50/50 split work? What value would I bring to the table with no capital in the game? Do I propose that I do all the work/management of the job? I’m just a newbie so I’m trying to understand my value other than just being super eager and determined to make money and be financially free. Is my value my time, my business I own? I’m not sure. I guess figuring that out is key. I think I need to understand my value and what I bring to the table. But to know that I need to know what is valueable to other investors besides money. Any insight?

You hit the nail on the head. Find the property, manage the rehab, deal with any and all headaches that will definitely arise. Be on site, make sure it goes smoothly, sign for everything. You will earn your 50%, and sometimes you should earn more depending on the project. 

Time is the most valuable thing to most people who have money. Your value is giving them a return on their money without taking up their time. 

Originally posted by @Branden Sewell :
@Anthony Wick

From what I understand you can’t do a 203K loan if you plan to live there.

This is not accurate. Both regular FHA loans and 203(k) Loans are solely for owner-occupied 1-4 family properties.

There are some loan programs and down-payment assistance programs that might help you lower the 3.5% down.  But it sounds like your wife's income isn't qualifying you for a loan that is large enough to purchase a duplex in your area.  If you're bound by income, you're likely going to have to wait until your self-employment income can be counted.

You may want to look at the NACA purchase program. NACA is a non-profit that offers no down payment, no closing cost mortgages on 1-4 family properties and can include a rehab budget. Getting through the approval process can be a bit long and arduous, but can definitely be worth it. You start the process by attending a workshop in your area. You can check it out at naca.com.

@Nick C.

So how exactly do I convince a potential partner that I can handle that when I dont have the experience? Do I just tell them that I will do whatever they tell me to do to get the job done? I mean I haven't done this before so I wouldn't necessarily know everything to do. I would be willing to take a lower percentage just for the learning experience. I can do all the work that is no problem but I will need someones direction and knowledge. Will qualified investors see me as a waste of time, or will they still find value in me since I am willing to grind and work for the experience.

@Phil G. Wow! What an awesome response! I will definitely take a look into that. Shoot me a message and I will stay connected with you on that. If Im successful with that route I would let you know your advice worked for me. Would love to keep you in the loop. Best wishes!

@Branden Sewell where in the orlando area are you looking at? Have you checked the cities in the greater MSA? There’s deals to be had especially if you qualify for a FHA loan. I would be in heaven if I only had to put down 3.5% of purchase price for a property. If you owner occupy there’s banks that will do the FHA loan for you. Find a place and at the same time find a bank that will pre qualify you. If you’ve been pre qualified how much are you approved for?

Account Closed

We have been qualified for $200K but that is based solely on my wifes income. I am self employed and I have only had my business for a year. I cant include my income yet. We really would like to get out of renting an apartment though and start investing in our own real estate. Our goal was to get out of this when I lease is up in December so we dont have to renew and pay even higher rent. Not sure what is possible at this point but I am learning as much as possible and trying to find a way into the game.

Originally posted by @Branden Sewell :

@Nick C.

So how exactly do I convince a potential partner that I can handle that when I dont have the experience? Do I just tell them that I will do whatever they tell me to do to get the job done? I mean I haven't done this before so I wouldn't necessarily know everything to do. I would be willing to take a lower percentage just for the learning experience. I can do all the work that is no problem but I will need someones direction and knowledge. Will qualified investors see me as a waste of time, or will they still find value in me since I am willing to grind and work for the experience. 

One way to get experience is to volunteer your time. Go to your local meet up, see who the serious investors are and build a relationship with them. As you build camaraderie see if they need help with anything, that could be your foot in the door and put you on the path to building a track record of your own.

@Branden Sewell I'll assume you read the response stating FHA and FHA 203k loans actually require owner occupancy. Another idea would be to get an investment friendly and knowledgeable real estate agent to find an off market 2-4 plex, wherein you would ask for seller financing. No idea if that happens in your area, but the seller could get regular monthly paychecks and avoid large capital expenditure taxes by being the bank for you. And, it doesn't cost you anything to ask. With little down you may need to offer a higher interest rate (6%?) to be attractive to a seller. You could still amortize over 30 years but do a 5-7 year balloon and refinance in a few years and pay off the seller.

@Anthony Wick

I was working with a real estate agent and he was the one who told me I couldnt do a 203K loan if I planned to live there. He said it was a loan specifically given to those who plan to use the 203K to fix up and sell the home? I guess I will have to do some more research on that on my own.

Is there a way for me to find my own off market deal that would do seller financing, or is it better to go through a realtor?

Thanks!

@Branden Sewell I guess it depends on what kind of time you have. Generally, if you have a realtor that has done yellow letters before, it would be easier for you. But you could always search here for an example and send out your own letters if you know the area you're looking for and what you're looking for. Bear in mind, your realtor doesn't cost you any money, as their fees come from the seller, so I've always used a realtor. Also, are you attending any REIA meetings in your area? Great way to network and learn of possible deals happening. Or to find a partner!

Get a different real estate agent. Also ask the right expert- for loans it is the loan officer, for property purchase comps that is thr real estate agent, for repair cost that is a contractor... I would look at all the first time buyer info for your area. Fha is probably your best bet. Also find out if they will consider rental income. I dont know if Fha will do that.