Starting out investing can be such a daunting task. Getting in the right mindset, convincing your spouse, finding money, getting good credit, and many others all line up against you. Most of us don’t have a huge amount of money sitting around to buy a place outright, so we need to talk to the bank. I will assume that you have already decided what niche in which you will invest. After that, here are the steps you should take:
- Minimize expenses. Step 1. Don’t do anything else before doing this. There are so many ways to do this. Check out my free course to learn more about this.
- Save the down payment. This is very important. Put at least 10% of your take home money into an account to be used only for investing.
- Talk to Bankers. Learn about possible loans.
- Conventional Mortgage. This one will require 20-25% down, which can be a big hurdle when starting out. This is the typical mortgage which investors will get.
- FHA loans. This is the typical house-hack. In this type of loan you might need 3.5% down, which is really nice. You’ll have to live in the place yourself, but the loophole here is that you can purchase up to a 4-plex and live in one unit. This is the best strategy when starting out for most people.
- VA loans. You’ve got to be a veteran or active duty. It will have 0% down, and you can house-hack just like an FHA loan. Definitely use this if you have military experience – and thanks for serving!
- Lines of Credit. If you have other properties, you can pull money out of them to use to purchase. Most likely you’ll have to combine this with an above-listed loan type.
- Explore other financing. These ones require some creativity.
- Seller financing. Get the seller to pay your down payment or even finance the whole thing if they are really desperate to sell.
- Private money. These are usually friends and family with deep pockets who might give you a loan.
- Hard money. These are usually short-term high-interest loans. You’ll have to be sure you can get some other type of loan in about a year. I put this in here for completeness, but I certainly would be hard pressed to use this when starting out as it is very risky.
- Partnerships. Also known as joint ventures, you can put together a group and use other people’s money while you do the work. This is a good way to get started raising money, which is often needed to expand.
If you are ready to learn more, here’s that link again for my free course: Check it out here.
