First financial loan and down payment.

4 Replies

Good morning.

I am a single mother from a divorce which has left me with poor credit and just less than 10k in savings. My problem is that 20% to 25% down payment. I am looking for a duplex or triplex and I cannot live in for the 1 year minimum for the fha loan. I want to start my investments NOW but i know there's a method to the madness.

Anyone else experience this hard hurdle? Advice? I am a newbie maybe my understanding of these types of loans is not correct. This first loan to purchase seems to be the hardest obstacle to overcome atm. 

@Megan B Schweitzer Sorry to read about a divorce. That's no fun. Hopefully you moved past it and want to build new relationships. My advice is to improve your credit and try to save cash a long the way. FHA loans come with PMI and more strict property requirements. Conventional loans are better. Aim for better! Learn as much as you can about investing, strategy, market research, and running numbers before buying property. Investors don't have emotion when buying property. It's building with bricks windows, flooring, tiles, and location. It's not a forever home. It's a flip, rental, cash-flow ___ per month deal. It's not white picket fences showcased on HGTV.

What can you sacrifice to start the journey? What lifestyle choices can you drop to save more cash? What skills can you leverage? WHat value can you add to someone else? Unless you have experience that's what it takes to get into REI.

@Megan B Schweitzer sorry to hear about your recent hardship, but congratulations on your willingness to work hard to turn things around. I would not pursue buying an investment until your credit is built back up and you have stabilized income and cash reserves. If you try and invest before you have those pieces in place you might put yourself in a worse predicament if something goes wrong, i.e. Covid hits and your tenants don't pay rent for 18 months.

However that does not mean you can't start in real estate and even start investing, but you will need to think outside the box a little. First, start by reading all the BP books they publish if you haven't already. Start saving up some cash reserves. Join a local REIA group and start networking with other investors in your area. Learn and build connections. Some of my best deals have come from my REIA network, so it is worth your time to do this. Set up alerts on Zillow to see properties that are for sale in areas you think you want to invest in. Spend some time driving or better yet walking those neighborhoods meeting people, asking if there are any houses in the area for sale, and just learning about the areas in your market. As stuff comes in on Zillow grab a couple and start analyzing them every day just like you were going to put an offer in. Use the BP calculators. Pretty soon you will start to see what properties go for and what a "good deal" looks like.

Now for the investing part. Once you start doing all the stuff I just talked about you will build up knowledge, a network, and possible deals. Remember that tip about driving and walking neighborhoods? As you find out about potential deals, you can sell those leads to REIA members for a finders fee or even get the deal under contract and wholesale it to another investor. This doesn't take a lot of money on your part and won't involve having 20% down payments, but you will start generating cash in real estate while building up your network and knowledge even further.

Next, learn how to manage property really well. You will need to start by reading and talking to people in REIA. Then pursue some sandwich lease deals. These are where YOU rent from a landlord and sublease to a tenant. You make money on the spread, but you don't have all the risk that comes from "owning" the property, but you essentially "control" the property with a lease. I love this approach and use it myself even though I have my own rentals as well. In real estate investing "owning" property is good, but what you really want to do is "control" property and there are a lot of ways to do that without necessarily buying it outright and putting 20% down.

Good luck with your journey. This industry is amazing with a ton of opportunities. In the beginning education on ideas, markets, and strategies will get you where you want to go.

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Thank you both of you! 

i have cut back on a few things and set up an outside savings to build my capital and scraped up an idea to bring my credit up. 

ive been writing out my findings and learning the jargon. I feel im just not gonna move fast enough. 

ive read one of the bp books so far and am addicted to the podcasts and YouTube channels. 

Sandwich lease deal? hmm okay i will look into that! Again thank you both kindly! 

@Megan B Schweitzer I totally understand that thought process that you aren't moving fast enough. I went several years where financially speaking I didn't feel I was making any or very s-l-o-w progress. I spent a lot of time working, reading, and educating myself, but just felt like I was standing still. What I didn't realize is all the stuff I was doing was slowly adjusting my mindset, network, and financial position. Suddenly things started breaking loose and I rapidly started making progress (or at least if felt rapid). The reality is I was making small improvements over time that kept compounding and adding up and I just didn't see it because it was so small at first.

Now looking back on those days and where I am today makes me feel I am looking at someone else's story. Small, consistent actions taken every day will create massive changes over the long run.

The Japanese have a word for this. They call the concept Kaizen and it doesn't really translate well to English, but in essence, it means "Constant and Never Ending Improvement". They apply this concept to their lives and businesses. They believe making small incremental improvements will eventually move mountains. I can personally testify that I have found this true in my own life. I am sure you can as well. Good luck!