3 ways to buy your 1st investment property within the next 6 months (without putting 20% down)

Author

Caleb Smith
August 12, 2023

Hey everybody!

Welcome to another edition of “The Financial Freedom Blueprint” where we discuss the topics of real estate and financial freedom.

My goal is to help as many people as I can get started investing in real estate and eventually reach a goal of financial freedom where they can create a life they don’t need a vacation from.

I talk with new real estate investors often and a common question they ask me is how to fund real estate deals without putting 20% down.

Most people still believe that is the only way you can acquire an investment property.

However, I’m here to tell you that is not the only way to do it.

Although the bank usually requires 20% down when you buy a turnkey rental property, there are other ways.

Today, I am going to explain 3 of them.

1) Seller Financing

In this situation, the seller is acting as the bank.

You can typically negotiate price and terms directly with the seller that are more favorable than they would be with the bank.

With current interest rates where they are, this may be a great option.

Now you may ask, why would sellers not want a lump sum payment from a traditional sale?

However, some sellers actually prefer the monthly payments over the lump sum for multiple reasons.

Here is a sample deal:

If the seller owns the property free and clear, you can ask the seller if you can put down 10% and finance the rest.

The remaining 90% will be paid back to the seller over an agreed upon time period.

Many times it is paid back monthly for 5 years and then there is a balloon payment after that to pay back the remaining balance.

Paying back the remaining balance usually requires getting a traditional mortgage on the property at that time.

This is a very basic example, but should give you a better idea of how this works.

The main thing to know is that the rate and terms are negotiable and not set in stone.

2) Using a Rehab Loan

Another name for a rehab loan is a hard money loan.

These are financing options I talk about frequently that involve fixer upper properties.

If you buy the property at a low enough price, the hard money lender should be able to fund most if not all of the deal for you.

Sample Deal:

Purchase Price: $37,900

Rehab Costs: $55,000

Closing Costs: $5,000

ARV: $135,000

For example, if the hard money lender funds 73% of the ARV, then they would fund $98,550.

When you add up the purchase price, rehab costs and closing costs, the total is $97,900 which is less than what they would fund.

This means you can buy a property with $0 down.

It doesn’t always work this way, but this is an example of a deal I did in 2022, so it is definitely possible.

3) Finding a Capital Partner

When I learned that you can partner with somebody else to fund a deal, that became a game changer for me.

And I think it will help others as well.

For example:

50/50 Partnership

One person funds the down payment. The other member of the partnership finds the deal and manages the property.

This is a basic example of a partnership in real estate where two or more people bring complementary skillsets to the table.

You would both own 50% equity in the deal and could split the cash flow along with the profits from an eventual sale.

I hope these 3 basic examples help you realize the different options available besides the 20% down payment option.

Obviously, there is nothing wrong with putting 20% down on a rental property, but unless you are a high income earner, it can take a while to save up for that down payment.

And not everybody wants to wait that long.

Have a great weekend everybody!

Whenever you are ready, there is a way I can help you get started:

Active Investors

If you want to learn how to purchase your first investment property within 6 months, but don’t know what steps to take, please schedule a call with me using the link below to see if my coaching program can help.

The main strategy I teach is the BRRRR (Buy, Rehab, Rent, Refinance, Repeat) strategy.

I’ll help you minimize beginner mistakes and shorten the learning curve from years to months.

For Everybody

If you haven’t already, be sure to follow me on Instagram: @realestatewithcaleb

Disclaimer: My newsletter should be viewed as educational content and should not be construed as actionable advice without consulting the proper professionals.