Show153: Financing My First Property

Financing my first property

It’s the 3rd Day of Christmas!

This is always one of the top issues.

I hear it time and time again from my community of rookies..

“How do I finance my 1st property”

What sucks about investing in rental property is that there is most definitely a high barrier to entry…

20% is a lot of money.

IF you plan to buy a rental property using a conventional loan and not living in the property you can expect to have to put down 20%

So in real numbers…

…we’re looking at

$20,000 on the purchase of a $100,000 property.

That’s a lot of money

And is often one of the bigger challenges and obstacles that newbie investors have to overcome.

Where do I get the money?

If you’re anything like Kirk and I we had to save our money like crazy. We got married in 2010 (put our finances together while we were engaged in 2009) and bought our 1st rental property in 2012.

And did I mention we used most of the money we had saved at this point in our lives to buy it.

That’s scary stuff.

But two things here…

  1. It took us time to save to buy that 1st property. In fact, from June 2009 when we combined our finances to August 2012 when we closed on the first rental.

Granted, we weren’t specifically saving that whole time for the intention of buying a rental (while Kirk maybe…but me no) but we were saving like crazy to do something with it.

So that took us over 3 years.

2. Even though it was a lot of our money we still did it.

Yes, we were newly married, young ( I mean we were 23 years old) and had no kids.

So we could have survived if something bad happened.

But we still took the leap.

We had faith in the numbers we ran over and over again and the fact that we were committed to this thing working.

And so we did it.

Even with me knowing nothing (thank God for Kirk and his finance brain)

So if financing is the issue for you….

…the mountain that is standing between you and your first rental

Here are some tips:

1. House hack your rental so you can put less money down.

Using an FHA loan and living in the property first allows you to put as little as 3.5% down.

Remember that $20,000 down payment I mentioned earlier?

Using this strategy now makes that a down payment of $3,500.

That’s much more manageable for someone facing the money mountain obstacles.

2. Partner Up

Find someone else who has similar goals and interests as you with investing in rental property and put your money together to buy the first deal.

Just because you buy one together doesn’t mean you have to buy all of the rest of them together.

You might be wondering….”Emily, I don’t know anyone who is interested in doing this”

Have you asked?

Have you told people that you are interested in investing in rentals?

My guess for most of us is NO.

We tend to not talk about the things that make us vulnerable.

Start talking about it.

My guess is you’ll be surprised who you find that is also interested in reaching financial independence.

3 Be Patient and save the money

I know this one isn’t sexy or fancy.

But for crying out loud….get a budget, set some savings goals and just start putting your head down and doing the work.

Saving isn’t always easy. Especially if you’re a spender.

But the things you’re wastefully spending your money on now…are they getting you any closer to your financial goals?

Is Netflix and magazine subscriptions and eating out 5 times per week getting you any closer??

No.

So make some sacrifices, commit to yourself and your goals and save the money.

Remember investing in rental property is a marathon not a sprint.

Keep in mind…saving for the 1st one is the longest and hardest.

Each time it gets a bit easier.

All in all….instead of standing and staring at the money mountain standing in your way of your goals….

…start climbing the dang thing so you can reach the top and buy that 1st property.