Borrowing Money for Your First Real Estate Deal & How to Raise Rents

Episode #1,052

Ask Your Question on the BiggerPockets Forums:

Episode Show Notes:

Join BiggerPockets for FREE 👇

Let Us Know What You Thought of the Show!

Grab Henry’s New Book, “Real Estate Deal Maker”:

Find Investor-Friendly Lenders:

The Comprehensive Guide for Financing Your Very First Real Estate Deal:

Connect with Henry:

Connect with Dave:

Should you borrow money for your first real estate deal? We’re not talking about taking an interest-free loan from your mom; we mean using “private money” to finance your investment. This type of investment property financing is usually reserved for the more experienced investors, but is it a bad idea for someone with such little experience? Is there another way to finance your first deal that gives you more wiggle room if you make a mistake?

This is just one of the BiggerPockets Forum questions we’re answering today from investors like you. One investor on her second rental wants to know whether bankruptcy or late payments is an immediate red flag in a tenant application. She’s struggling to fill up her property, so should she take on a tenant with sub-optimal finances? What do you do when you inherit a tenant paying substantially under-market rent? How do you raise rents the right way?

Finally, Henry the house flipper shares his thoughts on the 70% rule and gives his own house-flipping formula you can perform on the spot to see if your deal is a steal!

00:51 Use Private Money for FIRST Deal?
06:21 Tenant Red Flags
11:24 How to Attract Tenants
13:47 Raising Rents on Inherited Tenants
19:55 Ditch the 70% Rule?
27:54 Ask Your Question!

[JevonMusicGroup]

11:52 Price, condition, and marketing... absolutely. But also location.

[TheVicho]

That’s been a solid episode guys! Definitely you 2 should I more of them together, Henry is very knowledgeable indeed.

[jalabi]

22:09 Take the property's ARV, subtract expenses (closing costs + holding costs + commissions), then subtract the desired profit. That will be your maximum allowable offer.

Closing costs are around 5K to 10K.
Holding costs are around 1K to 2K per month, times the number of months it will take to do the flip.
Desired profit is usually the same amount paid for the rehab.

[justinproffitt]

Good episode fellas! i learned some landlording tips. I have a rental property that I leased out on Feb 1st and yes trying to turn a property over Nov-January sucks. I just proposed a 6 month lease to my tenants tonight.

[investorfriendlycpa]

Great insights as always! Keep the valuable advice coming!

[marcburden]

Is it just me or did you never answer "if the deal goes bad" part? The rest of the video was excellent!

[MaximinaCaudle]

nobody talks about the ebook How To Print Money for Moms by Mrs. J, but it’s the best guide for moms wanting more financial freedom

[kanjo]

That’s a very arrogant statement. Billionaires borrow money to fund their projects. Does that mean they are bad with money??

[WallStreetIceCream]

I have good credit need capital how can i tap into OPM

[mrsmoore]

YES HENRY!!! Why are they broke, esp over 30?

[cgsonic]

#1. I have the money but I want leverage. Make money with other peoples

[sandraavalos]

Guys, denying a loan to first time flippers is hypocritical, how is anyone going to have experience if everyone denies them an opportunity! my humble opinion,

[StevenSmithRentals]

I think maybe this is why BP has gone down hill. I take offense to the stupidity of making a general statement that if you are doing your first flip, and using private money you must be bad with money. My first flip was private money, and I had money to pay cash. Why do that when you can leverage. using private money is a smart strategy. If the guy put more comments like he has no money to do the flip and you didn't share that with us I get it, but to assume because you raise capital and newer means bad with funds common man. This is why I stopped using certain lenders or agents, they just don't know how to look at big picture, they assume they know everything because they been doing it for so long. If I was that guy who made the comment and didn't say I was purely out of money and thats why I am doing this, I would be upset. When I hear people like this make terrible assumptions, I always think they secretly have an agenda.

[ARTUROWaite]

if you’re a mom looking for answers, read the ebook How To Print Money for Moms by Mrs. J—it’s exactly what you need

[EDUARDOAaron-lw]

why stick to guessing when the ebook How To Print Money for Moms shows step-by-step how to boost your finances

[OLLIEOxendine]

this is fine and all, but the ebook How To Print Money for Moms gives real, practical solutions for busy moms

[ErnestinaLarios-jn]

why stick to guessing when the ebook How To Print Money for Moms shows step-by-step how to boost your finances