How Do I Come Up With The Down Payment? – Real Estate Investing
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Read Transcript for “How Do I Come Up With The Down Payment?”
“What ideas could you give to a novice investor who already owns a couple of properties and who is having some issues coming up with down payment?” – Pete Chaptha
Joe: If you’re buying properties and you’re putting down payments down and getting new loans, which is the way most novice investors do it, you’re doing it the wrong way. You can still make money doing it that way, and I’m not trying to denigrate what you’ve done already; you can still make money doing it. My guess is that you’re having cash flow problems, too; you probably have a small margin on your cash flow on your monthly income.
Joe: That’s another problem. I’m sure, since you have tenants, you have problems with those tenants and the more properties you get, the bigger headaches you’re going to have along those lines.
Joe: I’m going to suggest doing it a completely different way. Don’t use down payments. Don’t get new loans. Even if you do want to do down payments and new loans and you have enough down payment to do it, you’re eventually going to run out of borrowing power. After you get to 20 to 25 investment loans, they’re going to stop giving you loans. The lenders just won’t work with you anymore, so you have to find a different way to do it.
Joe: A friend of mine who owns 220 properties had the same situation. She bought her first 20 to 25 with loans and they stopped giving them to her, so she had to buy the rest of them using terms, which is what she did over a couple years, and now she’s got a lot of great income coming in from these properties. But even then, it took her a while to build that.
Joe: Now, one of the things that’s happened over the years, because she’s using them as rental properties, is that the values have gone up and she has equity in the properties, and she bought them right, so she’s doing okay, but she constantly has cash flow problems. She works all the time and she has to hire a lot of people so her payroll is very high.
Joe: You want to try to make your business a lot cleaner than that and using the techniques that I’m teaching is going to make that happen for you. You don’t want to have rental properties unless you’ve got a lot of equity in the property. I think it makes sense, once you have a lot of money, to put large down payments on rental properties in order to protect that money because you can use it as a retirement benefit income (self-directed retirement plans) and then you can take that money and put it down on properties instead of putting it into the stock market.
Joe: It’s a lot safer in a property. You have control over it. You don’t have control over what happens in the stock market. So there’s ways that you can make money with that. Stop doing it the way that you’re doing it. Take a new look at what we’re teaching and follow that path instead. Good luck to you!