All Forum Posts by: Ian Hannon

As @Mark Safrin mentioned, it comes down to how much risk/return you want to take on. Depending on your market, it would likely be relatively easy to deploy 2 million over 4-6 deals. Your return would be significant, but your risk is high. If you have to foreclose on one of those properties, a large portion of your funding would be tied up, and the foreclosure process can cost 8-12k and take upwards of a year in some places. If you do go with the high risk/high reward route, it would make sense to only leverage up to 65% of ARV and still have the borrower pay for an appraisal on the front end to protect you both.

If you do invest in a private fund as was suggested, you may get closer to a 6% return instead of 10%, but your risk is mitigated significantly as the money is invested across multiple projects. The experience factor is significant as well.

Overall, I don't think you have a bad option. I have personally worked with private individual lenders and larger hard money lenders both as a borrower myself and a broker and there are pros and cons to both paths. It will come down to how much risk you are willing to take on and how comfortable and prepared you feel taking on the role yourself. Good luck!

Hi Elias-congrats on making moves so early in your career. There are a couple of avenues you could go depending on what your strategy is moving forward. 

The one year requirement to live in the house is if you are buying it as a primary residence, FHA or conventional. If you are not looking to need funds outside of the 20-25k that you have, buying a multi-family, complying with one unit being your primary residence, and renting out the other units would be one way to achieve that, as you could put down as low as 3-5%. This avenue would require "full docs", meaning tax returns, bank statements, debt to income ratio stipulations, etc. I have a couple of current rentals that were primary residences and it is a good strategy.

The other option to get something in that price range with your currently liquidity would be to BRRRR a property using a private/hard money lender as a bridge between purchase and refinancing after it's rented out. Hard money lenders typically care about the deal more than they do about full tax returns or DTI. Depending on the purchase price, you would likely need just a little more than the 20-25k you mentioned, but likely not a ton more.

These are two very different paths so it will be up to you which model works for you and your partner, but they are the two paths I would recommend with the parameters you gave.