How to finance 1st deal?

7 Replies

Hello everyone,

over the last couple of months I’ve began studying and researching the idea of real estate investment.

I have settle on the idea of a multifamily property, duplex or may be 3 units.

my big questions is what is the best way to finance your first deal? How did you guys get started? I’m looking to purchase in CA

Hey Jonathan,

My first deal was a triplex that I house hacked. I put 20% down to avoid PMI, live for free and have it cash flow a bit more when I left the property. To be honest, I would not say there is any wrong way to finance your first property, it all depends on both the funds you have available and your long term goals. If you are not too concerned with leaving your job and looking to start building your real estate portfolio slowly, maybe you can can go the same route of 20-25% down. If you do not have a ton of cash at hand for investing, there are multiple strategies. I would recommend reading Brandon Turner's books, "The Book on Investing In Real Estate With No and low Money Down" to get some ideas.

Have you considered starting with a house hack? Its a great way to get started and lower your living expenses at the same time. As mentioned in Brandon Turner's new multifamily volume one book, its a great way to put get into investing with your training wheels on. 

Good luck on your journey!

Thank you for your reply and information!

I guess I could have added some more details…

I’m not looking to leave my job anytime soon, I’m looking to build an additional income stream but I know there is no “get rich quick” formula.


I am open to house hacking but in my area it’s a little tricky based on properties available. I’ve thought about converting the garage into an apartment as a way to house hack.

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Hey Jonathon, it's great to hear you want to get started. First step I would recommend is to get in touch with a rockstar agent and lender. Find out which loan programs are best for you. Usually FHA 3.5% down is the way to get for 2-4 unit house hack, but I've heard rumors that conventional is lowering their down payment for this. A good lender will be able to give you the specifics. Work with the agent to nail down your crystal clear criteria of what you're looking for!

You can always use private money to finance the deal. Start with a bridge loan with a lender funded rehab attached, build in equity then refi to pull out your initial investment. You would still need 15% - 20% for a down payment though it is easy to add a partner to these types of loan to shore up where ever you may be lacking. Going with a commercial mortgage will also keep you bankable because they are not reported to the credit agencies. DTI wouldn't be touched.

Originally posted by @Bradley Dosch:

Hey Jonathon, it's great to hear you want to get started. First step I would recommend is to get in touch with a rockstar agent and lender. Find out which loan programs are best for you. Usually FHA 3.5% down is the way to get for 2-4 unit house hack, but I've heard rumors that conventional is lowering their down payment for this. A good lender will be able to give you the specifics. Work with the agent to nail down your crystal clear criteria of what you're looking for!

 I just got a conventional for 5% down last year.

FHA 3.5% down, VA 0% down, conventional 5% down. All for homes you intend to occupy. So for the first step, talk to a lender and see what you qualify for and/or capable of purchasing. Second step, find a property. I prefer value add where you could do a little work or have someone else do a little work and increase the value of the property/amount of rent you can get on said property.

Work with a lender in your area to find out what you can afford in terms of price range, mortgage payment, and down payment. This will help you narrow down your search so that you aren't looking at properties out of your price range. Like others have said, an FHA loan is great if you are looking at a 2-4 unit property since it only requires 3.5% down. A conventional loan currently requires 15% down for a duplex and 25% down for 3-4 unit. The difficulty is that a lot of sellers are wary of FHA loans because they have more stringent requirements in terms of the home being 'move-in ready.' There's a major stigma against them and a lot of sellers won't consider offers backed by FHA loans if they have other offers to consider.

Don't spin your wheels too much on all this before finding a solid agent and lender who can guide you through the process.