How to finance a rental property with no money down
How to Buy Rental Property with No Money Down (Beginner Tips)
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this is real estate rookie episode 180.
[Music]
my name is ashley care and i am here
with my co-host tony robinson and
welcome to the real estate rookie
podcast where we focus on those
investors at the beginning of their
journey so maybe you haven't done a deal
maybe you've done a deal or two and
you're looking to scale either way this
is the podcast for you so ashleycare my
co-host what's going on not much i have
my little assistant remington james here
next to me if you're watching on youtube
you can see a little bit of this cute
little face
he's patiently waiting um until it's
time to go to the movies tonight to see
sonic 2.
okay i love that sonic 2. i haven't seen
that no is that with jim carrey is it
isn't he in sonic he's in it yeah he's
in the person he's probably in the
second half okay all right cool cool i
love that
um well yeah what else is going on ash
what you got what's going on in the
business what's new
how's the mcl how's the acl
um it's doing good i got it like
straightened out right now trying to get
it straighter over time um i'm going to
physical therapy a lot my physical
therapist has become my best friend
the only person i see every day but um
yeah it's so going slow but going good i
have one more week left on crutches and
then i can at least ditch the crutches
and go on just have my brace on and i'll
have that on for about another four
weeks so all right well there you go
progress yeah yeah yeah
and what about you are you uh doing well
after getting over your uh competition
are you uh splurging
what's
your diet look like these days my diet
has literally been everything though
actually i'm eating you know pizza uh
cereal like i'm rebounding real real
hard and heavy but we uh we got another
show planned for august um so i got a
couple weeks off and i'll start kind of
ramping up for that next show so uh if
you guys want to follow along on that
journey be sure to follow me on
instagram tony j robinson and if you
want to follow ashley long and her uh
her recovery she's out well from rentals
on instagram as well um but speaking of
instagram today's question actually
comes from idm so if you guys want to
get your question uh featured on the
show you can get active in the real
estate rookie facebook group uh get
active in the bigger pockets forums or
you can slide into the dms maybe ash and
i will uh we'll pick your question but
today's question comes from rodney hill
and rodney's question is
there is one question that stumps me
people say you can do your first deal
with no money down yet others say you
need twenty percent down payment i live
in tampa and a twenty percent down
payment is between thirty to sixty
thousand dollars but an investor gave me
advice to just get twenty five thousand
dollars saved up and then i should be
able to do my first deal so i don't know
if that makes sense or if it's gibberish
but my question is should i save 25 to
60k for a down payment on my first
rental or is there a way i can get into
a rental with less than 25
down um so what what are your thoughts
ash well i think this is a
great question for you just talking
about the vacation loan so if he wants
to do
uh you know long distance investing or
what is kind of the rule on that ten or
not ten um like
two hours away from your primary or
yeah typically go into that first
because i think that's like the first
thing that pops into my head is that
vacation loan mortgage and you know that
better than i do yeah totally so it's uh
yeah the second home or vacation home
mortgage um
it's a 10 down payment
um there are some restrictions so you
have to be or the property that you're
buying the second home has to be i think
typically like 60-ish miles at least
away from your primary residence you
cannot have more than one in the same
geographic area so if you buy one in
tampa you can't buy a second one in
tampa
and then you have to use the property
for personal use typically for at least
14 days out of the year so as long as
you're able to check those boxes you're
able to then rent that property out on
sites like airbnb and verbo
when you're when you're not using it now
interest rates on those loans used to be
almost in lockstep with uh primary
residences
now we're seeing them to be about a
point higher there's been some changes
in kind of how the the government is
regulating those but um you know we've
scaled a lot of our portfolio using the
the 10 down second home loans in
different markets yeah the second thing
that would come to mind for this is
seller financing
so talking with a seller where you don't
have to put down a huge down payment and
you can put down a smaller down payment
and it's not like they need to keep that
mortgage for you hold that mortgage for
you for 30 years you can make a balloon
payment or make it callable in a year a
couple years enough time that you can
add some value to the property and then
go to a bank and refinance all of your
money out kind of just doing the bur
strategy but instead of bringing your
own cash or money from a personal line
of credit you have um you're having the
seller hold the mortgage for you so a
couple ways to actually approach that
with a seller is to say to them i know
have you thought about seller or have
you talked to your cpa or accountant at
all about seller financing
and often they will say no i haven't and
you can say okay i just didn't know
because of all the tax advantages if you
wanted to maybe talk to them i'd be
interested in doing that too and that
usually at least gets the wheels turning
on the seller to have that conversation
with their cpa because your their cpa is
going to be your best friend because
they are going to say yes it is an
advantage because instead of taking this
lump sum of 200 000 in one tax year the
amount of money your tax on is going to
be spread out over those payments that
you're getting over three years or
however long they're going to to hold
the seller financing so if you look at
the income tax brackets you're as you
increase your income each year you're
taxed at a higher rate so
if your tax if they're only getting you
know 50 000 of that in the first year
they may only be
taxed 15
if they're going to be they get that
whole 200 000 then maybe they're going
to be taxed i don't know i don't even
know what the tax brackets are right now
35
or whatever
i'm winging it i i i actually was on a
call the other day i had someone look it
up while i was talking about the same
thing but um so you have your accounters
have their town or cpa sit down with
them and talk to them about the tax
advantages of doing seller financing so
i think that's a second great option too
yeah i i think the third option i mean
there's so many options right ryden i
think that that's the beauty of real
estate but a third option is find a
partner that does have the capital
and i know the the initial
rebuttal to to find a partner is well i
don't know anybody
and luckily for you it costs nothing to
go out and meet people right so rodney
if you go to your local real estate
meetup if you get active on the bigger
pockets forums if you get active in the
bigger pockets real estate rookie
facebook group and you start networking
with people and saying hey here are the
kind of deals that i'm looking for
and you start finding out if there is
anyone that will be interested in those
deals but they don't have the time
desire and ability uh to manage that
property or maybe if it's a rehab to
manage the rehab identify what value you
can bring to that person and then maybe
there's a way that you guys can work
together we we have interviewed guest
after guest after guest that has done
something similar where there's someone
that has the capital but they don't have
the time desire and ability to find the
deal manage the rehab manage the tenants
do all the things that come along with
actually turning that property into a
solid investment so build your network
find good deals and see if you can
provide value in that way i think that
that's how you've built a lot of your
business is taking advantage of that
where you are the experience you have
you can manage the properties you can
get the properties you know everything
and then your partners are the ones that
are coming with the money and leaning on
you for all of those qualities all those
traits all that whole skill set um and
for my first property and even for the
first several properties i took on a
money partner and that was how i got
started was just partnering with someone
we actually did an llc together where we
were partners and i think that scares a
lot of people it's like oh i don't want
to be like tied into a business with
someone but tony you structure your
partnerships with a joint venture
agreement where there's a lot less
liability so i think that's another
option too to look at is you're not
having to open a bank account with this
person you're not having to file a tax
return together all these different
things you can do the joint venture
agreement which keeps you a lot more
separate and you don't have that you're
not tied together so much especially
when it's your first deal you're doing
together yeah so rodney there there are
so many ways that you can go about
getting that first investment without
having to come up with the capital
yourself um so hopefully some of the
things that ash and i pointed out today
is some some actionable advice for you
and for all the other rookies that are
listening but um start taking action man
uh build that network start networking
and see who who you can find they might
be able to help you and you'll be able
to help them well thank you guys so much
for listening don't forget to leave us a
review on your favorite podcast platform
i'm ashley at wealth from rentals and he
is tony at tony j robinson and we'll see
you guys next time
[Music]
you
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