Getting started, 10% down? - Posted by Jeff

Posted by terryr on March 17, 2001 at 17:06:08:

you have got a GOOD THING - nothing wrong with what you are doing as long as property (rents) will support projects and produce POSITIVE cash flow - it is easy to buy houses no money down and still go bankrupt - i am trying to convince my wife this very thing

Getting started, 10% down? - Posted by Jeff

Posted by Jeff on March 17, 2001 at 12:37:20:

I’m just getting started investing and came into contact with a mortgage company who pre-approved me for an investor loan that requires 10% down on a property purchase. The consultant explained to me over the phone that they own properties in the rental market area I’m interested in. I also have a line of credit at my credit union which I could access for the 10% down payment. I was just wondering how feasible this type of financing sounds (for rental homes) or if I should just stick to something such as Lease/Option purchases as a beginner?

Re: Getting started, 10% down? - Posted by Ed Garcia

Posted by Ed Garcia on March 18, 2001 at 09:29:59:


I want you to know that I am an advocate for lender financing because I feel if used properly, you will grow. However don’t think for one minute that I would turn my back on a lease/option, or would not attempt to structure all of my deals with a seller carry-back.

Jeff, many times the deal speaks for it’s self. If the seller won’t lease option or seller carry-back, and it’s a good deal, then what is there to think about. On the other hand, if the deal is a skinny deal, Meaning not enough profit, then it may not justify financing it using conforming financing because it may not be cost effective. A perfect example is a flip.
I’ve seen investors wanting to arrange financing on a flip, that didn’t warrant it because the profit wouldn’t justify the cost.

Ed Garcia

Re: Getting started, 10% down? - Posted by Scott M.

Posted by Scott M. on March 17, 2001 at 17:34:38:

Sounds like you have a pretty solid situation. Are you using a mortgage broker or a lender with their own money to lend? I went through a broker for my first deal and was told I wouldn’t have any trouble getting a loan up to $100,000 but when my broker found a lender for me, they ended up backing out at the last minute because I didn’t have enough reserve cash and my deal fell through.

Make sure that you’re actually approved and find out what the amount is. I’ve heard somewhere that when you’re pre-approved they’ll give you some sort of certificate that states that fact. That way you can show a seller that you’re a serious buyer and you’re not going to waste their time (and your own). Anyway, you may want to double check on that just to be sure.

If you know you’ll get the loan, go for it. It may make more sense to get started right away. If you pick up a duplex or some other multi unit property and the numbers show you’ll have a positive cash flow, you can take some of that money to help you pay down your debt with the highest interest rate first.

Suze Orman has a very good plan for paying down debt in her book, “The 9 Steps to Financial Freedom.” It might be worth checking out.

Best of luck to you!!