Question for the experienced here. How do you find the money starting with nothing to funds closing costs and down payments for 20-30 properties for rentals? Do you do some flips to build a stash of cash or do you use lines of credit?
dw,
The “secret” is to buy at a BIG discount. If you buy at a big discount, then you can get your small local bank to loan you up to 70% of the appraised value (as determined by their appraiser). You will not be required to put up a down payment and the closing costs will be covered by the loan. The bank will feel good because there is 30% equity. You may even get some cash back at close. but remember that you have to pay it back with interest. Do not get extra money unless you absolutely need it.
That’s how I’ve done it.
Mike
Thanks Mike, this is exactly what I am trying to do. I wanted to see how others have accomplished theri goals in that way. My first property I did as a refi purchase and pulled cash to use to get my second property and my third property I used a hard money lender because I got it at around 40% of arv I am putting about 5k into it and will pull at least 10-15k out of it at refi which I will use to put into other properties buying at a discount and do the same until I can buy for cash low priced and then refi as rentals. I am looking at a property now although its only around a 10k discount it would make a good rental.
Prop Mgr,
Like most people here I want to get started in this business with a combination of buy and hold rentals; bird dog /wholesale. I’m in San Diego and its really starting to slow down…If I want to buy at a deep discount say, 30% to cover costs ie down payment, closing costs etc, where I look to find comps to get an accurate view on making a deal go. Most importantly where can I find these types of properties. Any insight would be appreciated…
Newbie in SD
Do you find your properties on the MLS and offer 70% of asking price? How do you find them? If you don’t mind my asking.
Hi no I dont mind you asking at all., I find my properties with good contacts that I have in the area. A couple other investors that have great contacts, know the area and are looking to just quickly flip or wholesale properties. For instance the last one I got was a bank forclosure. The bank actually calls him because he has been doing this for years, he put the property under contract and just flipped the contract to me for a quick couple thousand and we both made out. Before I even started investing I went out and did a lot of groundwork to make sure I had good contacts and people that could help me (property manager, rehab crew etc.) then after I had the groundwork done I started buying properties. Although we have only started buying properties about 4 months ago we have 3 and will most likely buy another before years end. As property manager stated in his response the best way to buy properties is way below what they are worth. I invest in low income areas where a lot of inverstors shy away from because of the headaches involved. To me headaches mean more money. I have property managers to take care of the “headaches”. Its worth it to me to have them take care of the day to day nuances although it does cut into my bottom line in the over all scheme of things once we reach 20-50 properties I really wont have the time to take care of them and work more deals. That is just the way I feel although you may get many different opinions which is great. Thats how we learn.
Good luck
That sounds very much like my plan. I just have to make the contacts now. I also plan on bidding at 70% on properties on the MLS. Even if 1 out 20 take, it is still worth it to me.
Yes you are right. Just think all you need is one good deal per year depending on where you live or are investing to make your paycheck for the year.
Don
dj & stoop.
are you using an agent to bid on your props you find in MLS?
I dont use the mls. I dont like to use agents because they generally like to charge top dollar for properties. I havent found a good one yet.
sditsurfer,
I find my deals from a variety of sources. I have a realtor that hunts down great deals, mainly REOs. I have people call me just because they know that I’m a serious investor and will buy good deals. That comes with being in business for a while. I’ve bought several deals from disgruntled landlords, mostly from my local REIA. If you don’t belong to your REIA - WHY NOT? When I’m actively looking for deals, I put a small ad in the classified section of the newspaper. The ad says " Facing Foreclosure? Need Cash Quickly? We Buy Houses. XXX-XXXX". I’ve gotten a few deals from this little ad. I’ve bought at sheriff sales and have bought at estate sales. Another GREAT source of deals is just being out there doing business. I’ve had people offer me houses at Lowes, at the plumbing shop, etc. I agree with dwj - it is all about meeting people.
I do not use comps. I KNOW my market because I have looked at literally hundreds of houses. I have a better idea of values than the realtor or the appraiser, because I am actually out there seeing what’s happening. When you first start, go look at 100 houses for sale in your target area (I’m talking inside and out).
I don’t agree with dwj about using a property manager. I manage all my rentals myself and could easily do 75 to 100 without much problem. Doing the work yourself is how you maximize the profits with rentals.
Now, here’s a question for you. What have you done to find deals?
Good Luck,
Mike
Hi Mike, thanks for the reply you gave me some ideas.
Everyone,
Thanks for all the feedback and advice…I am off from my job today and I have been reading these blogs along with other books I have read to absorb as much knowledge as possible. I am very interested in this business and I am like many other beginners, learning how to go about this to become successful.
To answer your question I am going to REI club meeting to absorb more info and network…
I am thinking of finding investors here to bird dog / scout for and hopefully along the pull the trigger for a deal of my own.
Since i live in San Diego the market here has really slowed down…any thoughts on out of state investing…? I have little money to invest so I need to find a “good” deal that makes sense…
Thanks again to all
Can you walk me through your first deal and possible the second? What was your cash credit situation?
When I make my first deal I will have about 8k in cash 3k in credit and a 650 fico. Do you think it is feasable to start off with this?
what are the prices of the properties you are working with? Anything is possible I literally started with none of my own money and still have used none of my own money or credit.
I plan on low balling 2-4 families in the 70k-150k range.
Yes you will be able to do that no problem. The key to the whole thing is finding the deals and doing it. I am doing a blog with my experiences I will put it in my sig. as soon as its somewhat ready. That will tell you how I went about all my deals so far. Only have a few properties right now but working on more of course.
It is certainly possible to buy rentals with no money. However, starting with rentals with no reserve of cash or credit is VERY risky. You are betting that there will not be a significant problem and that you won’t have multiple vacancies in the beginning. This is not a safe bet. It is simply a roll of the dice.
To answer stoopitnewb’s question directly, yes I think that it is feasable to start with $8k cash and $3k credit as long as you’re not using that money to buy the property or repair it. Obviously, it is critical that every property have a positive cash flow using the real world numbers (no guru numbers).
Mike
thats great advie MIke. As an example the very first Property I got had a flood in the area the first in 60 years. Flooded the basement of the property puttin the bottom of the hot water heater under water ruining it. Had to replace it. $450. Next since I have low income tenants code stopped by the steps needed to be fixed. That cost 250 all of this in the first month. As well as tenant kids flusinhg things down toilet etc. etc… Anyway you should always as prop manger said have some sort of stashed cash just in case.
dwj469,
If you need money to start, why don’t you tap into IRA retirement accounts to finance your down payment and C/C. It doesn’t necessarily have to be yours. It can be a combination of more than one. It is a great way to come up with the money. You can buy real estate tax free with Self directed Roth IRA’s
Tony