How did you raise your down payment for your first deal?

Rental Property Investor · Philadelphia Suburbs · Member since 2019 · 45 posts · 11 votes

Trying to save up as much as possible for my first buy and hold property. Any tips to get the best ROI to raise money for a down payment?

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Matt Honeyford

Investor · Rochester, NY · Member since 2017 · 206 posts · 175 votes

@Cory Benhardt

I went to 5 credit unions and opened up unsecured personal lines of credit. I did it all on the same day and was able to secure 3 of them. Each at $20k.

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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
7y
Save.
Read "Set For Life" by @Scott Trench because it has plenty of good ideas for saving up. You've got to look at your biggest expenses (rent, car, insurance, gas, food, drinking, utilities) and figure out how to cut costs and purposefully set that money aside.
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7 Reply
Frank Geiger
Rental Property Investor · NC · Member since 2018 · 776 posts · 776 votes
7y
You probably won't like my answer but its no secret. Cut expenses and get a roommate if you can. Having that kind of money won't happen overnight. You need to be determined and relentless.
3 Reply
Haena Choi
Member since 2019 · 1 post · 3 votes
7y
The podcasts touch on building partnerships with other real estate investors. BiggerPockets has a great community, but I love this question because I am curious how I can build relationships with local investors/real estate community.
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3 Reply
Frank Wong
Real Estate Broker · Bay Area · Member since 2018 · 1k+ posts · 3k+ votes
7y
If you have no real estate experience and no "VALUE" to bring to the table you do it the old fashion way. Save the money from your job and use that to invest.
5 Reply
Victor Sarkisyan
Van Nuys, CA · Member since 2018 · 77 posts · 18 votes
7y
I've been stuck in this situation for the last few months. Here's what I've been going through and hopefully it sheds some ideas into what you can do.
My wife and I just moved into a buddy's house he's renting that allows for subleasing. We pay 50% of the rent which comes out to about $1200 a month - huge savings where I live. I've been able to save a ton of money from my new job I just got and my wife works, we have no kids but we do have 2 - 4 legged creatures we call our own.
We budget accordingly and penny pinch, cook at home (huge money saver), and pay down our debt. I have a student loan I am throwing almost everything I got at. Bonuses from work, extra cash at the end of the month, so on.
After all of this, we STILL dont have enough for a decent down payment in LA, in close proximity to our family (we have to be close for personal reasons), and houses here are getting snatched up with cash offers.
So... I thought to myself. I can either keep saving money and have 100k for a down payment on a house here, or I can invest out of state, pay down the mortgage, and have enough after a year to purchase another property, again out of state. This ensures I have a steady flow of income from investments, I will have gained knowledge for future transactions, and of course, two years later I wouldnt tell myself "I should've invested out of state."
1 Reply
Alan Pederson
Investor · Kennedale, TX · Member since 2016 · 219 posts · 349 votes
7y
The old fashion way. We cut expenses, eat at home, live well within our means, and save as much as possible. It took years of saving up to get the money to do our first deal.
2 Reply
Brian Babbage
Rental Property Investor · KY · Member since 2018 · 24 posts · 18 votes
7y
@Cory Benhardt
All the tips above are great and you should follow those (I certainly did).
Adding to them build relationships with banker (this could allow you to put down less than 20%, I did 15% on my first deal)
or
House hack and get an FHA. Putting down 3.5% is very manageable for properties in smaller markets. Move in, fix up, move out, and repeat.
5 Reply
Dennis M.
Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
7y
The old fashioned way : work harder safe every penny back and live like a pauper . Despite what the gurus teach ;There’s no elevator to success , everybody has to take the stairs
2 Reply
Cory O'Dell
Rental Property Investor · Dayton, OH · Member since 2018 · 142 posts · 74 votes
7y
Honestly? Just hard work combined with diligent saving and time. Cutting out frivolous expenses and redefining what "need" means allowed us to go from saving maybe 10-15% of our income to 40-50% each month. Then we used that money for down payments. The downside to this strategy is it can take significant time to accrue a decent portfolio of rental properties. So to mitigate that you can "re-use" your money by using the BRRRR strategy.
1 Reply
Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
7y
Like most others here, I save my money, cut costs and don't spend my money on stuff I don't need. Also find a way to earn extra money. I rarely eat out and cook from scratch.
1 Reply
Christian Nachtrieb
Rental Property Investor · Medford, MA · Member since 2016 · 288 posts · 171 votes
7y
I did what everyone else is suggesting, budget, cut expenses, earned more working on the side freelancing. But I also took money out of my Roth IRA to speed up the process. Risky move but it paid off, as I BRRRR'ed the money back.
0 Reply
Travis DeForge
Rental Property Investor · Wiesbaden, Germany · Member since 2019 · 49 posts · 50 votes
7y
I learned as much as possible until I could explain the process in detail, in under 2 minutes, to anybody. Once I reached that point I found people I was talking to every day would approach me about partnering on deals. It's a lot easier to come up with 10% down and have a partner put in the other 10%. Just be prepared and ready to do a lot of the leg work ahead of time. Know the markets you are looking at, be able to speak confidently about the property and neighborhood class you are looking at. When you exude the confidence and competence on the matter, partners will present themselves. Even if you haven't done a deal, the fact you have done a ton of the leg work and the research is an asset in itself.
4 Reply
Michael Noto
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
7y
@Cory Benhardt As others have mentioned, saving is the key and there is really no way around that. One thing to also consider to increase your savings rate is to start a side hustle or business that fits your current lifestyle. If it can be real estate related that is ideal, but it doesn't have to be.
2 Reply
Seann Brown
Rental Property Investor · Los Angeles, CA · Member since 2018 · 17 posts · 3 votes
7y
@Cory Benhardt
I just bought my first one using funds from my 401k.
2 Reply
Matt Honeyford
Investor · Rochester, NY · Member since 2017 · 206 posts · 175 votes
7y
@Cory Benhardt
I went to 5 credit unions and opened up unsecured personal lines of credit. I did it all on the same day and was able to secure 3 of them. Each at $20k.
8 Reply
Cory Benhardt
Member since 2018 · 1 post · 0 votes
7y
Thank you everyone for the answers! Time to start assessing my finances even more then I already do and see where I can save.
0 Reply
Grant Rothenburger
Investor · Taylor Mill, KY · Member since 2016 · 2k+ posts · 964 votes
7y
@Cory Benhardt
You can flip houses to build up your cash, not saying it's easy but it's a way.
0 Reply
Dennis M.
Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
7y
if you have good credit you can get unsecured loans but going into a deal 100% has more risk especially starting out
0 Reply
Ariel Hernandez
Rental Property Investor · California, CA · Member since 2019 · 2 posts · 0 votes
7y
@Cory Benhardt This is my first reply but anyway the way I saved up for my first home was I looked at ways I could cut down on useless spending. For me I use to spend a lot of money on meal prepping not because I paid for a service but because I didn’t want to eat the same thing lol anyway I started having the same meals weeks at a time. This helped reduce my food waste. I even did uber on the side. I saved up a lot of money by doing those two thing. Also managing your utilities and other expenses that you control also help. Ex) eating out, drinks, clothes, etc...
0 Reply
Cassandra Sifford
Rental Property Investor · New Castle, DE · Member since 2016 · 376 posts · 158 votes
7y
I funded my down payment and renovation costs using the HELoC on my primary residence. I saved along the way, paid off some credit cards and increased my credit score to get a good interest rate
1 Reply
Caleb Heimsoth
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
7y
@Cory Benhardt. I saved half of my take home I come for 10 months. Then just kept going.
0 Reply
Bo Kim
Rental Property Investor · Los Angeles, CA · Member since 2016 · 141 posts · 123 votes
7y
@Cory Benhardt
Like many said, biggest expense will be your living situation. Move back home if thats feasible and save, find a room mate or house hack for 5% down in most non coastal states (dont wait for 20%) This move alone will set you up for the long run.
I bought my townhouse with 5% down in 2017 ($25k) instead of waiting for 20% or 100k. Now the value has gone up by 80k and I used the heloc of build in equity from only leveraging 5% down to scale my rental portfolio to 18 units.
1 Reply
Tyler Mullen
Investor · Kirkland, WA · Member since 2017 · 310 posts · 271 votes
7y
Make saving/investing your top line expense. Every income you receive, make it happen the same day. It should be as assumed and second nature as paying for food. You don't neglect or forget that, it gets done no matter what.
Once you start to build little amounts in asset accounts you'll build confidence in what to save/invest in and motivation to save/invest even more of your income. It's the asset version of the debt snowball. There is no best one saving/investing vehicle so do a few, consider cash, metals, passive index funds, stocks... Do it passively or hire a manager if you don't have the interest to learn it.
1 Reply
Jason Dillard
Real Estate Broker · Greer, SC · Member since 2013 · 548 posts · 271 votes
7y
@Cory Benhardt cutting your living expenses and saving is great advise. However, that sure makes it take a long time. I didn't know any better when I started, so I found ways to buy without making a down payment. I bought over 100 before I made down payment on one. Seller financing, buying subject to the mortgage, and using private money is how we still buy 95 percent of our deals. It's not magic. It's tons of work and requires money to be invested in advertising. We make about 60 valid offers to buy one property. More importantly, we continue to make offers to potential private lenders so we can fund our deals. It's not really "no money down" because our advertising budget, our payroll for office staff, and other overhead like gas has to be spent to be able to make that many offers. Even so, our cost to percure a closed deal is very small compared to a "normal" down payment. I advise beginners to spend time and cash into their business. How much time will you devote per week to generating leads? What can you already afford per month on some type of advertising? If you budget your time and money to lead generation, (and stick to it) eventually you'll find that motivated seller we all dream about.
0 Reply
Matthew McNeil
Rental Property Investor · Boise/Portland · Member since 2017 · 709 posts · 742 votes
7y
Someone offered to sell his house to me with no down payment. He held the note until I sold the house 6 years later, which gave me a sizable amount that I used to purchase more properties.
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