by Tyler Flagg
Creative financing gets a lot of attention from new investors, and rightfully so. It’s flipping awesome!
Who wouldn’t want to buy properties for next to nothing? Especially when you are just starting out and have very little disposable income. However, I’m here to play the devils advocate for the sake of newbies out there.
So far I have acquired three properties by way of 20% down conventional mortgages. And you guessed it, I found them all on the MLS.
Sexy huh? ::crickets:: I know… it’s pretty boring. But let me explain.
I’m not very smart. But I’m smart enough to know that I don’t know what I don’t know… y’know?
Real estate can be overwhelming for a new investor. It definitely was for me when I first got started. Despite having read a ton of books and having done the math on a ton of properties, I still made a ton of mistakes. This is where that whole 20% down conventional loan thing saved my buttocks.
3 Ways Using Conventional Loans Saved Me From Disaster
1. It helped me build my team organically.
All I had to do was find a real estate agent — and the rest of the pieces fell into place from there. Once we found a property, my real estate agent put me in contact with a great bank. The bank hired the inspector, the bank hired the appraiser, and the bank coordinated with the Title Company. Once the sale was finalized, the real estate agent recommended a property manager, and the property manager recommended a contractor. Everything was accomplished without me having to track down and interview a dozen team members.
2. It uncovered problems and saved me a lot of money
I fixed a house with my dad when I was growing up, so naturally I though I was an expert. After walking through the property once, I felt it was in great condition and would require about $2,000 in minor cosmetic repairs (HA!). Had I done this on my own, I probably would have foregone the inspection to save money and just bought the place “as-is.” Luckily, the bank was smarter than me and required an inspection to be accomplished. What did this delightful inspection reveal?
- Needed a new roof ($8,000)
- Dead tree in the back ($3,000 + huge liability)
- Lots of deferred maintenance ($5,000)
As Lloyd Christmas from Dumb & Dumber would say, “Samsonite…I was WAYY off.”
Had I been doing this on my own, I probably would have given up at this point. There’s no way I was going to foot the bill for a new roof this soon. Luckily for me, my real estate agent was able to get the seller to pay for the roof through his insurance during the Treatment, Repairs & Replacements (TRR) period of negotiation. This was huge, and I would never have thought to suggest it myself.
3. Finally, it provided me with a financial safety buffer.
Mistakes are going to happen when you first start investing in real estate. Maybe you forgot to factor in vacancy. Maybe your insurance was higher than expected. Maybe the rent you can get is $100 less than you thought.
Now, would you rather have those mistakes happen when you’ve leveraged 100% of the property and need to self-manage in order to break even? Or would you rather have those mistakes happen when you’ve put equity into the property already and have considerably lower monthly mortgage payments allowing for cash flow?
Long Story (Kinda) Short…
I won’t lie to you and say that it doesn’t sting to sign a check for 20% down on a property that you’ll never live in.
It definitely stings the nostrils.
However, over the last 10 months I have purchased three properties and have been able to see how the process works hands-on. Now (and only now) do I feel comfortable enough with the ins and outs of buying property to pursue a creative strategy.
As we speak, I’m trying to work out a seller financing deal with someone who is liquidating his properties. I’m sure I’ll make mistakes, but at least I won’t make the same ones that I did on properties #1, #2 and #3.
Creative financing is amazing and should always be something to strive for. Buying a property with OPM (Other People’s Money) is the holy grail of real estate investing. However, if you are a new to real estate and have the capital available… don’t rule out a conventional mortgage.
It might just save YOUR butt, too.
- Newbies: Have you utilized conventional financing for your initial investment property purchases?
- Experienced investors: How would you suggest making the transition into creative financing?
Leave your comments below!
Interested in Finding out More? Reach out below
Address: 1415 Main St. #823, Grandview, MO 64030
This information is intended only for the use of the intended recipient(s) and it may be privileged and confidential. Please note that any views or opinions presented in this post are solely those of the author and do not necessarily represent those of the company. This is reposted information and is not original thought of Ireland Investments or anyone associated with the business.
Popular areas we service;
Kansas city Missouri, Overland Park Kansas, Kansas city Kansas, Olathe Kansas, Independence Missouri, Shawnee Kansas, Blue Springs Missouri, Lenexa Kansas, Leavenworth, Kansas, Leawood Kansas, Liberty Missouri, Raytown Missouri, Gladstone Missouri, Grandview Missouri, Belton Missouri, Prairie Village Kansas, Gardner Kansas, Raymore Missouri, Grain Valley Missouri, Ottawa, Kansas, Lansing Kansas, Excelsior Springs Missouri, Merriam Kansas, Harrisonville Missouri, Cameron Missouri, Mission Kansas, Kearney Missouri, Smithville Missouri, Pleasant Hill Missouri, Oak Grove Missouri, Bonner Springs Kansas, Roeland Park Kansas, Parkville Missouri, De Soto Kansas, Richmond Missouri, Greenwood Missouri, Paola Kansas, Basehor Kansas, Tonganoxie Kansas, Odessa Missouri, Peculiar Missouri, Platte City, Missouri, Higginsville Missouri, Lexington Missouri, Edwardsville Kansas, North Kansas City Missouri, Osawatomie Kansas, Louisburg Kansas, Fairway Kansas, Mission Hills Kansas, Sugar Creek Missouri, Riverside Missouri, Buckner Missouri, Pleasant Valley Missouri, Lawson Missouri, Plattsburg Missouri, Lake Lotawana Missouri, Weatherby Lake Missouri, Wellsville Kansas, Edgerton Kansas, Westwood Kansas, Garden City Missouri, Gower Missouri, Claycomo Missouri, Lone Jack Missouri, Drexel Missouri, Lake Tapawingo Missouri, Glenaire Missouri, Dearborn Missouri, Avondale Missouri, Osborn Missouri, Sibley Missouri, Oaks Missouri, Unity Village Missouri, Levasy Missouri, Randolf Missouri, River Bend Missouri, Jackson County Missouri, Johnson County Kansas, Clay County Missouri, Wyandotte County Kansas, Cass County Missouri, Platte County Missouri, Leavenworth County Kansas, Miami county Kansas, Lafayette County Missouri, Ray County Missouri, Clinton County Missouri, Bates County Missouri, Linn County Kansas, Caldwell County Missouri, Crossroads Real estate, 18th and vine Real estate, Hospital Hill real estate, library district real estate, longfellow real estate, dutch hill real estate, quality hill real estate, river market real estate union hill real estate, Greater downtown KCMO real estate, East Side KCMO real estate, Midtown KCMO real estate, Westport Real estate, Hyde Park real estate, Northeast KCMO real estate, Northland real estate, Plaza Real estate, South Kansas City Real estate, Fairway Kansas real estate, Kansas city Kansas real estate, Lake Quivira Kansas real estate, Lenexa Kansas real estate, Mission hills Kansas real estate, overland park Kansas real estate, prairie village Kansas real estate, Shawnee Kansas real estate, weatherby lake Missouri real estate, westwood Kansas real estate