Made my first move in REI

5 Replies

Hello again BP, I just recently found that the foreclosure I've been watching dropped into my price range. I contacted my "stand by" realtor to take my first steps. Through my local bank I sat down with the lender and asked a lot of stupid questions along with playing with numbers. I found that I didn't have near enough money.

The lender stated that the foreclosure I was looking st required a 3.5% down payment plus around 6% closing! I knew the down payment was a firm 3.5 but completely forgot that I was chasing a foreclosure meaning I had to pay all closing costs too. Any advice or chasing the foreclosure? Being my first investment would it be wise to just stick with the MLS and find a seller to maybe take some of the burden away from the closing costs?

Hi Michael,

I'd say don't limit yourself to just one strategy, look for both. And take the time and effort to save. If the 9.5% is too much, you are not leaving yourself any cushion for when the water heater breaks. Big expenses will pop up at the worst times. watch your risk as well as your benefit. good luck!

Hey @Michael Bacile ,

I would always keep your options open. But if it is your first deal, don't let the closing costs keep you from getting a good deal. It's worth trying to partner with someone who has money and more experience so you can learn from them, if you can show that it is a good deal you shouldn't have any trouble finding an investor. But following up with what Amanda said, you definitely do not want to stretch yourself too thin with money cause unforeseen issues are bound to come up. Maybe focus on learning more and saving as much as possible for the time being.

Hopefully this advice helps and good luck on the search! 

Hey Michael, I'm new to Orlando- from Los Angeles.  I'm also looking at deals in the area. I agree not to stretch too thin, but also believe you can find a partner if the deal is right. I would love to see what you decide/how it works out. 

Keep us updated.

~K

@Michael Bacile - if the deal is right don't let the closing costs scare you.  Bake the closing costs into your analysis.  Other means of getting deals, such as hard money, might have higher cost to get the deal, but if you bake the costs into your analysis and it looks good then you are good to go.  

Getting a deal on the MLS where a seller may pay 2% of your closing costs might sound intriguing, but you may also pay more if its on the MLS (other times you can find a good deal even though its on the MLS). Every deal will vary, and everything should be considered depending on your situation and what you are trying to accomplish.

If you haven't tried them already the BP calculators are a great way to run analysis and you can break down all of your upfront costs.  At the end it will give you the breakdown of the deal, including the upfront costs, cash flow, cash on cash return, etc.