How do we get $ for House #2 when we spent savings on House #1?

First-Time Home Buyer
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How do we get $ for House #2 when we spent savings on House #1?

Jordan Spillers
Member since 2022 · 6 posts · 1 vote

Hey! We're on the verge of acquiring property #1 (YAY!) and we're using the majority of our savings since it's not an FHA or Conventional loan. However, we've got our eyes on some other properties, and we're trying to figure out where the cash will come from for the 20% down payment for property #2. If we make something like $3,000 per year on Property #1, it would take us another 5 years to save up that cash from that rental property to acquire another one. I'd love to hear any ideas!

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Scott E.
Contractor · Scottsdale, AZ · Member since 2010 · 2k+ posts · 3k+ votes
4y

You say if you saved $3,000 per year for 5 years then you'd have enough to buy another... So you're targeting homes ~$75,000 that only require $15,000 down?

If that's correct, the good news is that $15,000 isn't much money. You can..

- Pick up a side hustle and save up $15k in 6 months (uber, mowing lawns, post mates, etc)

- Reduce your expenses to increase your savings rate

- Buy a 2-4 unit to live in 1 unit and rent out the others, this way you can get an FHA loan with 3.5% down

- Ask friends, family, acquaintances if they'd be interested in partnering with you on your next deal

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  • Nathan Grabau
    Realtor · Longmont, CO · Member since 2021 · 577 posts · 631 votes
    4y

    Congrats on your first acquisition! Is it possible for you to live in property #2 for one year so you can use a 5% down loan product? If you are cash constrained, this is probably the best way to start building a portfolio.

    In terms of 20% down properties, I underwrite with 3% appreciation and about 2% loan paydown each year. A cash out refi, added your cashflow gives you the money for another down payment much faster! Even in a "cashflow" heavy market like central Iowa, I am finding that my returns are about 2/3 to 3/4 attributed to appreciation/ loan paydown. 

    Depending on how much money you make, you could also get a major tax savings from getting a cost segregation report. I am currently underwriting buying a new house to use my current house as a str or ltr(not sure which yet) and I think I can pick up a tax savings for tax year 2022 that is in the range of 50-75% of the down payment for the new property. I would listen to BP Podcast 631 if you want to learn more about this. 

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  • Scott E.
    Contractor · Scottsdale, AZ · Member since 2010 · 2k+ posts · 3k+ votes
    4y

    You say if you saved $3,000 per year for 5 years then you'd have enough to buy another... So you're targeting homes ~$75,000 that only require $15,000 down?

    If that's correct, the good news is that $15,000 isn't much money. You can..

    - Pick up a side hustle and save up $15k in 6 months (uber, mowing lawns, post mates, etc)

    - Reduce your expenses to increase your savings rate

    - Buy a 2-4 unit to live in 1 unit and rent out the others, this way you can get an FHA loan with 3.5% down

    - Ask friends, family, acquaintances if they'd be interested in partnering with you on your next deal

    1Reply
  • Lien VuongBusiness Member
    Real Estate Agent · Boston, MA · Member since 2018 · 2k+ posts · 1k+ votes
    4y

    Maybe you can refi and get some $ out or go to purchase a second home with 10% down which reduces your cash in the deal. 

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