which strategy to use to fund my first investment property?

6 Replies

Hey BP, I have 250k in equity in my primary residence and want to get in to the rental property game for cash flow. The goal is 10k in passive income via multifamily apartment buildings. I have good credit and have many years of tax returns with six figure plus income. What strategies should I research for my first investment property? Apply for a mortgage, get a HELOC, find a seller financing deal…etc?

Hi @Aaron Champion

congrats of your decision to get into the multifamily game! When it comes to MF, credit is not important. It's mainly your net worth (which should be equal to the loan amount), and the property income. I'd stay away from HELOC - the interest rates are higher than other loans, and you don't need to risk your main residence to start investing.

You can start small - 10 or 20 units, with a partner or with several partners. Another way is to invest passively with a syndicator. 

You are welcome to check out my website for information on how to do it. Good luck!

Hi Ellie,

Thanks for the info and you have a beautiful website! What are your thoughts on this strategy? If I were to start small with a 10-20 unit. I get pre-approved for a conventional loan and use that as a down payment?

Aaron,

It looks like you are set up to start investing with equity in your home and good income. I think jumping into the 5+ Unit MF market might be tough without a proven track record.

I would set up a HELOC and buy 1-4 Unit properties and build from there. I took that approach around 10 years ago and it has helped to get me where I wanted to go. Feel free to PM me if you have any questions.

Kai

@Account Closed said, go with the financing option. If you're starting out with smaller multi-s (2-4 units), they are considered residential, so it'll a residential mortgage if you buy it under your name. LLC may have a hard time obtaining a loan. Definitely consider seller financing, but again - most lenders don't care much for seller financing as a part of the deal.

@Aaron Champion - thank you! I'd advise against this strategy. You're talking about 100% leverage, and this is how investors got into trouble back in '08. Another way to start is to find a deal and get sweat equity for doing all the work, while other investors put the money. This is only my opinion, of course. Some investors with more appetite for risk might consider it.