It is possible to enter the real estate market with little to no savings.
Investors who started with very little money report on the strategies they used to acquire their first properties.
Some raised capital, others bought with partners and shared the costs.
When it comes to buying your first home, capital is often one of the biggest hurdles, especially for investors with little savings. Aside from the down payment and closing costs, buying an apartment or house requires a lot of money.
However, it is possible to enter the real estate market with little to no savings. The following stories from six real estate investors who made it prove it.
The successful investors spoke to Business Insider and shared the creative funding strategies that made their success possible.
20-year-old college dropouts Caleb Hommel and Chuck Sotelo raised capital and structured vendor financing
For Hommel and Sotelo, their first property had to meet three conditions: the young investors wanted an apartment building with tenants they could take over and a seller who was open to seller financing.
The third condition was the most important condition for them because they could not have bought a property without seller financing.
Hommel and Sotelo, who met on day one of high school, were teenagers when they decided to invest in real estate. They had no savings other than a few hundred dollars and didn’t even know how good their credit really was.
At the time, they were still attending junior college and part-time working as food delivery men. With that money, they signed up for a mentoring program designed for real estate investors.
Vendor financing was necessary given her age and financial situation, Sotelo told Business Insider: “We worked for DoorDash and made about $400 a month. No bank grants a loan under such conditions.”
And so the young investors found three financiers for their first property. Each of the three investors spent $30,000 on a ten-unit estate in South Texas that cost $900,000.
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“Obtaining the money wasn’t as difficult as I expected,” says Hommel, “we simply approached everyone, presented our business and checked whether they were interested.” It helped that they worked so hard put into the search for an excellent property. He adds: “Once we realized that all we needed was a good deal, the process became much easier.”
Zeona McIntyre took out a private loan instead of going through a traditional mortgage lender
Like Hommel and Sotelo, US real estate investor Zeona McIntyre failed to qualify for a mortgage when she first started looking at real estate.
She had neither a regular job nor significant savings. But she wanted to buy an investment property — a $162,000 studio in Boulder, USA.
To buy the apartment, McIntyre approached one of her previous landlords, who was also an investor and worked as a private moneylender, and asked for a loan.
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“I practiced my pitch in the shower, got up the courage and went to talk to him,” says McIntyre. “It was surprisingly easy. I must have caught him on a good day when he had enough money in the bank. He was very open and willing to help me. We worked out a personal loan and he didn’t have to check my income or anything else. He knew I was in the massage business and then I felt like I could afford it.”
Sean Allen bought his first property with a friend to share the initial costs through syndication
Sean Allen started out with $8,000 in savings. That wasn’t enough to buy a house on his own, so he teamed up with a friend to buy his first property.
Together they had about $16,000 in cash, Allen says. They did the math and concluded they could afford something worth $60,000. At that purchase price, they could pay 20 percent down ($12,000) and then have $4,000 (3,700 euros) left over to pay closing costs.
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Both were living in Southern California at the time and figured they probably wouldn’t find a $60,000 property in the market there. So they started looking in Greensboro, North Carolina, where Allen went to college.
They flew to Greensboro to meet with a real estate agent, looked at properties and found one they could afford.
Allen and his partner put down a 20 percent deposit and did some minor renovations. After finding tenants, they began collecting rent at $220 a month.
Natia and Jervais Seegars used a grant to buy a house to buy
Natia and Jervais Seegars received many rejections from lenders before they could afford their first home. After three years of paying off their debt and improving their credit rating, they were finally able to get a mortgage.
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In September 2006, the couple finalized the purchase agreement for their first property, a house in their state of North Carolina. The Seegars put down just $2,000 for a $191,000 property.
That was partly because they funded it with an FHA loan. This government-sponsored Federal Housing Administration mortgage allows US citizens to buy a home with a down payment of just 3.5 percent.
However, a 3.5 percent down payment on a $191,000 home would have totaled about $5,700 — and that total doesn’t include closing costs, which are typically 2 to 5 percent of the loan cost turn off.
But the couple qualified for a grant for low- and middle-income homebuyers at the time: the Genesis program. The program, designed to help families who are taking out FHA loans and need financial help with down payments, made it possible for the Seegars to complete the purchase with just $2,000 out of their own pocket.
This article was translated from English by Amin Al Magrebi. You can find the original here.
Disclaimer: Stocks and other investments are always associated with risk. A total loss of the invested capital cannot be ruled out either. The published articles, data and forecasts are not an invitation to buy or sell securities or rights. They also do not replace professional advice.
2023-09-05 10:20:07
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