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in Real Estate Investing · April 22, 2021

How to Use Creative Financing to Buy Rental Properties When You Don’t Have Money

If you have been reading real estate books, you may know what private lenders are. For those of you who do not, private lenders are individuals like you and me that have spare money to invest. They can lend money to you at a higher interest rate for a shorter period so that you can buy a property.

If you have read any of my “Here is the Deal” blog series, you may have read that we have acquired most of the properties we have by borrowing all of the money needed to purchase including the down payments. We have been able to accomplish this by using private lenders.

Below I will give you a summary breakdown of the creative financing combinations we have used to buy properties using other people’s money. We still have a lot to learn, but so far, it has been quite a learning experience. To be honest, having so much debt can be stressful at times, but so worth it. 

The Duplexes

Purchase Price: $350,000 for both.

Purchase Funding Strategy- Total Debt $355,000

  • Personal Loan from Sofi.com (Ryan) $85,000 at 13% interest with $1,500 monthly payment
  • Personal Loan from Wells Fargo $15,000 at 11% interest with $300 monthly payment
  • Excess Student Loan $10,000 at 4% interest with no monthly payment (deferred)
  • Private Loan Velocity Mortgage Capital $245,000 at 7.25% interest with $2,600 monthly payment

Little Mermaid (Property No. 3)- March 2020

Purchase Price: $85,000

When we bought this property, we still had the SOFI and the Wells Fargo loan from properties 1 & 2, so we had to get creative to find more funds. 

Purchase Funding Strategy – Total Debt $85,000

  • Wells Fargo Business Line of Credit $20,000 at 10% interest with $400 monthly payment
  • Publix Credit Union Line of Credit $10,000 at 9% interest with $500 monthly payment
  • Personal Loan Sofi.com (Katherine) $50,000 at 15% interest with $1,500 monthly payment
  • Wells Fargo Credit Card Advance $5,000 at 20% advance fee paid back immediately

In June 2020, we refinanced The Duplexes and Little Mermaid and got $58,000 cashback. We used these funds to pay down some of the loans and buy property no. 4.

Big Horn (Property No. 4)- July 2020

Purchase Price: $65,000

Purchase Financing Strategy – Total Debt $40,000

  1. Private Loan from Friend $20,000 at 12% interest with $200 monthly payment
  2. Wells Fargo Line of Credit $20,000 @10% interest with $400 monthly payment
  3. Cash from Refinance of Property 1,2 & 3 $25,000 

In December 2020 and February 2021, we sold the Duplexes at a gain. We got $140,000 cash from the purchases which we used to pay down the debt acquired previously and partially fund the purchase and repair of the next set of properties. 

Magnolia Fourplex (Property No. 5) – February 2021

Purchase Price: $136,000 after credits

Purchase Financing Strategy – Total Debt $140,000

  • Personal Loan Sofi.com (Katherine) $70,000 at 10% interest with $1,400 monthly payment
  • Personal Loan Sofi.com (Ryan) $70,000 at 10% interest with $1,400 monthly payment

2nd Street House (Property No. 6) – March 2021

Purchase Price $ 55,000

Purchase Financing Strategy – Total Debt $10,000

  • Private Loan $10,000 from Dad at 5% interest with $41 monthly payment
  • Cash from Sale of Duplexes $45,000

Skyline (Property No. 7) – March 2021

Purchase Price $45,000

Purchase Financing Strategy – Total Debt $50,000

  • New Private Loan Friend (NP) – $30,000 at 13% interest with $325 monthly payment
  • New Private Loan Friend (ZK) -$20,000 at 13% interest with $167 monthly payment

As you can see, we get into a significant amount of debt to fund these deals. I didn’t include the credit card debt incurred to rehab these properties. We had to max out on several credit cards to make these repairs: $10,000 Home Depot Credit Card, $5,000 Wells Fargo Credit Card, $13,000 Chase Business Credit Card. 

By the way, if you are thinking of getting a Sofi Personal Loan 💸, you can get $310 bonus if you use with my referral code. Link

You may have noticed that we escalated the available credit and reduced the cost of borrowing as we bought new properties. We had to apply to get new credit. We didn’t have all of the lines of credits from the beginning. However, now that we have them, we have more options. 

I’ve spent years trying to get rid of consumer debt that I incurred during my irresponsible years, so the general consensus would say that I should avoid debt at all costs.

However, I knew I wanted to start investing and when I saw the duplexes, I saw a huge money ($$) opportunity and I knew I had to go for it. We had decent credit and consistent income at the time. After running the numbers, we felt capable of taking on that much debt.

I have to be honest. On that first round, we were cutting it close. Our finances were not in the best shape and expenses were really high at the time. Regardless, I am glad that we went through with buying those duplexes.

The first $100,000 of personal loans haunted me for a while, but now that we have gotten through that first one, it somehow feels easier to take on more debt. Once you do it for the first time, it becomes repeatable. 

It’s been two years since the first round of debt. We have not only learned how to manage the debt payments, but we have also become more responsible with our personal finances, enhanced our money management system, and increased our take-home income.

After trial and error, we have become savvier on how to structure our debt as well.

We are working on obtaining more lines of credit so that we have more and more options to finance new property purchases. 

We have also secured a list of individuals willing to lend us money to fund the purchases and earn interest with us. Depending on the terms, we end up paying a bit more interest with these loans, but still worth it because these are interest-only loans. This helps us maintain monthly obligations low while we do rehabs.

We still have a long road ahead of us. There is so much more to learn, but this is a marathon, not a sprint!

As I write this, I realize that I making dreams come true one day at a time.

I had just turned 20 when I first became interested in real estate investing. Little did I know that I would become a real estate investor before turning 30 😊

Before I wrap up, I wanted to make a disclaimer for the sake of full transparency. Ryan and I are high-income-earners with consistent W2 income. This is why Ryan and I are comfortable taking on so much debt. We have gotten our expenses to where we only spend 30% to 40% of our income and together we both bring home roughly $11,000 per month after taxes and deductions. This leaves us with about $7,000 a month free to invest and cover any debt obligations incurred.

Everyone’s journey is different and I am only able to speak to my own.

This doesn’t mean that if you are not a high-income earner, you can’t do any of this.

There are so many options out there. Many successful real estate investors began their journey with a $20,000 salary and $0 in the bank. As the saying goes, where there is a will, there is a way.

If you want to learn more about zero-money-down techniques, I would recommend The Book on Investing in Real Estate with No (and Low) Money Down: Real-Life Strategies for Investing in Real Estate Using Other People’s Money by Brandon Turner.

This post may contain affiliate links. I may get commissions for purchases made through links in this blog.

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New Blog Post 🚨 In this week’s blog post I am New Blog Post 🚨 In this week’s blog post I am going over why we bought a short-term rental, our experience so far. Plus what we did prior, during and after purchasing our first short-term rental in March 2022, a Cabin in Blue Ridge, GA.

Check it out at www.beyondjustnumbers.com or link in bio @beyondjustnumbers
I can’t stress this enough. Some investors are l I can’t stress this enough. Some investors are looking to make money from day one, but that’s not always the case. It wasn’t for us and I’ve talked to a lot of rookie investors who have told me “Thank God I have my personal finance situation together.” 

This is just my opinion. Do you agree? Let me know in the comments!

Want to join a free community of like-minded individuals? Join our REI Coffee Chat Community where we talk real estate investing, personal finance and financial freedom, and much more! Link in bio @beyondjustnumbers

Want to learn more about investing in real estate? Read my blog www.beyondjustnumbers.com

#realestateinvesting #realestateinvestor #creativefinancing #investmentproperty #buyrealestate #firemovement #debtfreejourney #financialindependenceretireearly #rentalproperty #investinginproperty #personalfinanceblog #wealthbuilding #planforretirement #investorlife #livefree #airbnb #moneyisfreedom #enjoythejourney #reicommunity #realestateinvestments #shortermrentals #cashflow #realestate
I used to think that investing in real estate was I used to think that investing in real estate was for the rich. I became in love with real estate while working for a real estate investment company that owned hundreds of units. This was back in 2011 and I was 20 years old at the time. I had less than 5 years permanently living the US, so I had no idea about anything. I grew up in Colombia and the only talk of money we ever had was the lack of it. 

The investors I worked for were a wealthy family, so naturally, I thought… Real Estate requires wealth. I don’t have wealth. Therefore, I cannot invest. 

I figured… well shit, I need become wealthy so I can invest in real estate. Eventually, after educating myself I realized how wrong I had it. You can build wealth BY INVESTING in real estate.

Took me a couple of years to figure it all out. Hence, why I didn’t start investing until 2019. I wish I had figured out earlier, but it is what it is. In just 3 years of investing in real estate, I was able to accumulate more wealth than I ever thought possible. 

Just to give you an idea…Did you know you could invest in real estate with as little at 3.5% of the purchase price? For a $150,000, that’s only $5,750. Buy a duplex that needs a little bit of work, fix it up, rent one side and live in the other. This will reduce your monthly expenses significantly, save the money and do it all over again.*

Of course it’s not that simple, but it’s also not that difficult. There are some particular steps and considerations which is  why I recommend doing further reading on the subject. 

Book Recommendation:
✅“The House Hacking Strategy” by Craig Curelop and ✅“Investing in Real Estate with No (and Low) Money Down” by Brandon Turner. 

#realestate #realestateinvesting
🚨 New Blog Post! Continuing the “Getting Star 🚨 New Blog Post! Continuing the “Getting Started in Real Estate Series” 

You’ve found a property either on your own or through a realtor, you’ve run your numbers, you’ve got a lender and now you are ready to make an offer. What’s next?

In this post I want to discuss a few items:

✅Key components of a real estate contract
✅How do you make a compelling offer to ensure you get the property you want
✅The main contract contingencies and how they work
✅Communicating with your realtor

I also provide real examples of what we have done personally. 

Check it out at www.beyondjustnumbers.com

Let me know what you think!
If I listed all of the hats, I’d never end 😂. If I listed all of the hats, I’d never end 😂. Anyone else? Show me the multiple hats you wear and tag me. Let’s have fun with some reels.

Trying to get good at the real game like @investinginyourwealth. How did I do?
The fact that you are not where you want to be doe The fact that you are not where you want to be doesn’t mean you won’t get there. Greatness takes time. Focus on what you control.

And remember, it’s okay to pivot.

#mindset #realestate #firemovement #realestateinvesting #realestateinvestor #rentalpropertyinvestor #rentalproperty #cashflow #motivation #financialfreedom #financialindependence #financialindependenceretireearly
We see a lot of advice around hiring a real estate We see a lot of advice around hiring a real estate friendly CPA. However, when you look up  CPAs that specialize in real estate, they can be pricey.  However, that doesn’t mean that other CPAs or tax professionals aren’t good. They might not be particularly aware of certain items, but they can research and collaborate with theirs peers. Perhaps it may require you to do a little of work to compensate. Things you can do:
✅ listen to The Real Estate CPA podcast or join the Facebook group
✅follow social media accounts of the pricey Real Estate CPA and take notes of what they are saying
✅attend free educational events 
✅read BiggerPocket book on Real Estate taxes 
✅if you know anyone working with a really good Real Estate CPA firm, ask them what they are doing

Then use that to go your CPA or tax professional and be like “Hey, is this something we can do for me?” They’ll probably say, “Let me look into it”. 

If they are good, they are going to research it and/or ask their CPA peer group. (CPAs and tax preparers also have Facebook groups where they collaborate with each other).

Here is a piece of advice, if they tell you “No, we can’t use this loophole or no, you don’t qualify to use this strategy” —> Ask WHY and “How can I qualify in the future?.” This way you confirm they did their homework and aren’t just being lazy. Don’t just take no for an answer. You can then get a second opinion by asking a question in a forum or to your peers.

So don’t panic if you don’t have a real estate CPA or tax professional. 

Next video I’ll be answering the question… “Can I skip the tax professional altogether and do my own taxes?”

#realestate
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