When I started investing in houses, I was a self-employed real estate salesman with no steady income. Not one banker in my town would loan me money to buy property. As it turned out, that was a key to my success. It forced me to learn how to buy property without going to a bank to borrow money.
Many real estate investors who are millionaires today, started with only a little money. Some did not have a job with great credit. They bought their first property with a small down payment, and then they bought another property as soon as they could. They continued to buy, one property at a time, negotiating better terms and prices as they learned more.
The secret to being able to buy property that will make you large profits is to learn how to borrow on terms that your tenants can repay with their monthly rent. Buying a property with little or nothing down is a great strategy, as long as you can afford to make the payments. If you can’t afford to make the payments, you will never collect any profits.
Banks require investors who want to borrow to make a down payment, often 20 percent, and require good credit. They will only loan 80 percent of the purchase price or appraisal, whichever is lower. If you buy a house worth $200,000 for $150,000, they will only loan you 80 percent of the $150,000.
When you find a bargain, it is often because the sellers need to sell right away. If they could wait ninety days, they would and probably sell for more.
Unfortunately, banks will not make you a new loan in a few days. Borrowing from a bank takes longer and costs more than other sources. When you borrow from a bank you will pay high closing costs and they will charge you the current retail rate of interest. The paperwork you are required to sign will protect the bank, and if you read the fine print, you give them the right to take other assets that you own if you cannot repay the debt. A sit stand desk can massively help backpains when your working from home!
If you have a good job and good credit, banks will loan you money for a few house purchases. If you buy a lot of houses, you will find that lenders often have limits to the amount and number of loans that they will make you, and, eventually, the banks may refuse to make you more loans.