Payment buffer until PM finds a tenant?

Question

As I continue to discuss this new investment venture with family, I continue to get the same question asked.

I plan to go at this with no money out of pocket. I plan to do the research, construct a plan to pitch to a private lender, find a lender, find a deal, find a property management company, establish the down payment I'll need, use the money from the lender as a down payment for a 7/6 ARM (to keep payments low in order to more aggressively profit the funds to pay back the lender ASAP), once I pay back the lender refinance the loan. But what do I do about the loan payment until the property management company finds a tenant to rent the property? Do I simply include a little more on the requested amount from the lender as a safety net (say 3 or 4 monthly payments)? Any thoughts?

Jonathan R McLaughlin · Answer

thats quite a plan. Its a bit like " I plan to study, get a job paying 1M/year/then get elected to congress/then become president

The snark is intended to be friendly, used to highlight that each of these steps--while possible--requires a fair amount of work and the ability to convince people you are a worthwhile risk.

The idea of "skin in the game" is important. When you lead with "I plan to go at this with no money out of pocket" you are definitely setting a high bar for people to find you credible. At the very least, show me you can find a potential deal.

Jonathan R McLaughlin · Answer

@Erin Gipson if you are not in a position to save any money you aren’t in a space to buy real estate, you just aren’t.

Matthew Paul · Answer

Very unrealistic , ask yourself this . if you had money and somebody came to you and wanted to borrow 100% of the money to buy a property , and they have no money , no experience , and they want to have an LLC to shield themselves from liability ?

You arent talking about investing , you are talking about gambling .

Erin Gipson · Answer

@Michael Smythe

Thank you for the response. Please clarify which statement you were responding to. My last post?

Michael Smythe · Answer

Yes, that's how you typically do it

Peter Mckernan · Answer

There is a lot here.. The search should go, a deal then the money will come.. Or the partner(s) and everything else will fall into place. This deal and the process of getting a deal can be the one that will take the longest.. I would start networking now with people to find the deal, and partner/family to invest in the deal with you. Consistency is key!

Erin Gipson · Answer

So do you guys think that the direction I'm trying to take is unrealistic? If so, is there any advice for me as an alternative when considering a limited down-payment? I am hoping to start an LLC to limit my personal liability.

Erin Gipson · Answer

@Preston Dean

That's a good point. I'll make sure to do that. I hadn't thought of that. I appreciate your response.

Preston Dean · Answer

I see.

Make sure the mortgage company knows you are receiving a gift funds for the DP. It shouldn't be an issue but they need to know ahead of time to save trouble @Erin Gipson

Erin Gipson · Answer

Preston Dean-

No. I'm planning on utilizing the loan from the private lender as the down-payment for the conventional loan from a mortgage company. I, unfortunately, don't have a means of saving for the down-payment so that was the only way I thought that I could come up with it. Thank you for your response.

Payment buffer until PM finds a tenant?

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