I Started with Just $3,500: How I Bought My First Rental Property

You’ve got little savings but want to buy a rental property. You see so many “no money down” investing strategies, but how do you know you won’t get burned trying them out? If you want to learn how to invest in real estate with no money, the right way, you need to take tips from those who have done it successfully without overleveraging themselves. Today, we’ve got two experts who bought rentals with very little savings and did it the legitimate way. Deandra McDonald went from $5,000 in credit card debt and a $28,000 salary to financial freedom with rentals in just a decade. Dave Meyer (your host!) was waiting tables when he bought his first rental. Both did it without sketchy loans, running up credit card debt, or getting in over their heads—and they started with barely any money. In this episode, we’ll walk through the steps you need to take and strategies you must try to buy real estate with no money. We’ll talk about how to fix your credit and become lendable, improve your income so you have cash reserves, down payment assistance programs that can get you into your first property for under $1,000, and the minimum amount you’ll need to invest safely. No money? No problem. This is the blueprint for buying rentals with little to no money! In This Episode We Cover How to invest in real estate with no money and a lower income Down payment assistance programs that can cover thousands in closing costs The #1 best strategy for beginner real estate investors that requires the least amount of money How to fix your money habits and build saving skills so you’re ready to buy rentals Real estate partnership setups that give you equity in exchange for work What to do when a bank won’t approve your mortgage application And So Much More! Check out more resources from this show on ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠BiggerPockets.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://www.biggerpockets.com/blog/real-estate-1192 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠[email protected]⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Dave Meyer?

  Can you buy real estate with no money? Today, we're talking about how to invest without much savings. It is possible, and getting from your current financial starting point to buying your first investment property might actually be easier than you think.

• 0:19Dave Meyer?

  Hey, everyone, I'm Dave Meyer. I've been investing in rental properties for more than 15 years, and I'm the head of real estate investing at BiggerPockets. When I started investing, I had almost no money. I was waiting tables and got my first deal by partnering with three other people and agreeing to manage the property, even though I had no idea what I was doing. So it is possible to invest without much cash, but it means you'll need to get creative and find other resources or skills that you can bring to the table. We're going to deep dive into all of that today, and joining me to do it is Deondra McDonald. Deondra is an investor in Virginia and one of our most popular guests on this show. She also started, when she was not making a lot of money, only $28,000 per year, and

• 1:04Dave Meyer?

  had thousands in credit card debt before starting in real estate and growing a life-changing portfolio. Deondra and I are going to talk about how she was eventually able to get funding for properties after getting denied by multiple lenders, the best investing strategies for people without much starting cash, and what types of strategies people in this position should consider. Deondra, welcome to the show. Thanks for being here.

• 1:29Speaker 01

  Thanks for having me.

• 1:31Dave Meyer?

  It's great to have you back. If you all have not listened to Deondra's full story, definitely go listen to it. It's one of the most fun interviews we've done this year, episode 1105 from April 7th. But maybe you could just provide us a brief recap, Deondra, before we get into today's topic. Tell us a little about your financial position when you first started investing, what you were doing, and maybe how you got to your first property.

• 1:56Speaker 01

  Yeah, so I started as a house hacker. Right after I graduated college, it took me a while to get a job, but finally got one as a lab tech, making $28,000 a year. And what really pushed me into homeownership wasn't that I wasn't making a lot of money. It was my first rent increase notification. And getting that was really like, wow, no matter how low I get my rent, no matter how small I live, I'm forever going to be threatened with this increase in rent, and I just don't want to do it. And I decided, well, if I bought a property, then I wouldn't have to do that anymore. And the first time I tried, I got denied. But after a year and a half of like really going at it, I was able to find a property that fit a budget that got pre-approved. And from then on, haven't looked back.

• 2:41Dave Meyer?

  So tell me, how did you make that work? Because your blueprint is a good example of how other people can also go about this with low savings.

• 2:49Speaker 01

  Yeah, so I can tell you how I made it work and also tell you how I should have made it work. The first way I made it work was that I didn't. I really, truly didn't. When I went to get that first approval, they told me no. So what I was doing actually was not working. I thought if I just like, oh, I'll just put some essentials on my credit card and I will get a low car payment and I'll take the standard repayment for my student loan debt. It wasn't working. I could not even get approved for a little bit outright denied. There was nothing they were willing to do for me at all. And so I had to go back with the list that that lender gave me and say, okay, if I'm not going to make more money, what I have to at minimum do is pay down my credit card debt.

• 3:32Speaker 01

  If I can't make more money, what I at minimum have to do is save a little bit more. Because I was still trying to get a loan. I was still trying to get a conventional loan at that point. I could have qualified for an FHA. My conventional was 3%. And the FHA wasn't for a multifamily. So I said, well, I'll leave that for my next property dreams, right? I'm getting denied for the very first one. I'm already like, well, the second or third, let me have a plan for that one. And then I went to work. I did not have the skills or the education to do much more than what I was doing. So in order to make more money, I had to work more. And so I had to get a second job and a third and a fourth. And so I worked throughout the day at the lab. At night, I would work at the bar. I was a bartender. On the weekends, I was working as a lifeguard and I was a swim instructor.

• 4:16Speaker 01

  And for 18 months, I hustled and I cut all expenses in my house. And that might seem extreme, but that's how I was feeling at that moment, right? I didn't have internet. I didn't have cable. So after 18 months, I had managed to pay off my credit card debt and save. Thirty five hundred dollars. So, big money.

• 4:34Dave Meyer?

  That's awesome, though. But how much credit card debt did you have?

• 4:37Speaker 01

  I had about five thousand dollars in credit card debt.

• 4:39Dave Meyer?

  So, in total, it was like eighty five hundred, basically. Yeah, that's incredibly good.

• 4:44Speaker 01

  And then I was finally able to qualify for a eighty five thousand dollar loan. But I told you what I did, what I should have done, was look up down payment assistance programs. I would have qualified for those in a heartbeat.

• 4:58Dave Meyer?

  It's so funny that no one knows about these things.

• 5:01Speaker 01

  Yeah.

• 5:02Dave Meyer?

  Because almost every city and almost every state has them.

• 5:05Speaker 01

  And you can stack them. You can add it to other loans.

• 5:08Dave Meyer?

  Yep.

• 5:09Speaker 01

  The biggest qualification or need you have to do is just live in the property for a period of time. Right? But sometimes they'll say like three years.

• 5:17Dave Meyer?

  Yeah.

• 5:17Speaker 01

  Five years. There's a program right now that was available then because I asked them because I needed to hurt myself. I need to hurt myself sometimes to learn. They're offering twenty percent down. You just had to live there five years. And I'm so frustrated because I didn't look at duplexes and quads in 2014 because I didn't have the money. And you're telling me you would have given me twenty percent for the quads?

• 5:38Dave Meyer?

  Yeah.

• 5:39Speaker 01

  If I just lived there?

• 5:40Dave Meyer?

  Unbelievable. Just so everyone understands what we're talking about here is a lot of states and local governments have programs especially designed to help people who have low savings or low income or both to achieve homeownership.

• 5:57Speaker 01

  Yep.

• 5:57Dave Meyer?

  That can come in the form of down payment assistance, like Deandra just mentioned. There's also, you know, closing credits to reduce your closing costs. Sometimes there's tax credits. Like, there's all sorts of things. All you gotta do is Google them. And actually, this is pretty cool. I did, we actually had an economist from Zillow on the other day. And she mentioned they're starting to put this on Zillow, which is really cool. Based on your zip code, they're aggregating assistance programs that you might be eligible for. Or, the other thing I should say is like your agent or your lender should know about these things. They don't always, but like if you're working with a good investor-friendly agent, they should know about this stuff as well.

• 6:38Speaker 01

  Absolutely. I love that Zillow is starting to add that to that.

• 6:42Dave Meyer?

  It's cool.

• 6:43Speaker 01

  Yeah, because you can access, I'm trying to do more on my YouTube where I'm like, hey, guys, please. Please look up this free money, especially may or may not be here in a couple of years. If we're also being 100% honest, right? If those funds dry up, you're going to be very upset that you didn't take advantage of them when they were still there. Cause you're kind of operating like it's always going to be there. It's not.

• 7:03Dave Meyer?

  That is a very good point. All these things change all the time. And so you need to just jump on them if they're available to you. And it's not always this huge, like, oh, you have to apply and wait 18 months. Like a lot of things with the government. It's actually, some of these things are designed to move pretty quickly.

• 7:19Speaker 01

  I have a client who just closed on a house in South Carolina. Brand new construction, full warranty. She paid $800 out of pocket.

• 7:25Dave Meyer?

  That's amazing.

• 7:26Speaker 01

  And it'll be a fantastic rental also when she leaves. So we're housekeeping for the future, please.

• 7:32Dave Meyer?

  So given what you're saying, I like these two approaches. I'll just mention, this is your show, but I'll just mention that I, I got started a third way, which was partnering with people. Not everyone has access to that. I'm fortunate to have people in my life who were interested to doing this, had no desire to actually do all the work. So I volunteered to do it, but that's another way you can, you can get into this as well with low savings. I'm curious if you think there's sort of a minimum number that people need to get to in terms of savings to make a real estate investment happen in a responsible way. Because I really don't want people spending every last dollar they have on real estate. You should have emergency funds, depending on your job, your family situation, that kind of varies.

• 8:17Dave Meyer?

  But what do you think is like the minimum amount of investable capital that you need to get started?

• 8:24Speaker 01

  I think if you were going to invest with no money out of pocket, so you were trying to get, trying to get the deed with as little money as possible, I would love for you to have enough to replace the most expensive repair in that property that insurance is not going to cover, right? Cause like if it's a hailstorm, you're not responsible for fixing the windows and the roof and the HVAC that's been dented. So if we have enough. To cover our, literally our worst case scenario. And I think that gives you some space to take on ownership of this person's property. So for a condo, right? That might just be $3,000 for a mini split, right? Cause you're not responsible for the roof and you're not responsible for the grounds.

• 9:07Speaker 01

  But if you're gonna get a quad and that roof is not new, right? The things that I would want you to be, to have some money on.

• 9:14Dave Meyer?

  Or it's like a $20,000 furnace, you know, sometime, like super expensive stuff in some of these older homes with four units.

• 9:21Speaker 01

  That is not new and not under any sort of warranty. So that would be those caveats too, right? That's that insurance. If it's under warranty, then in theory you should be able to call up the warranty people and have them fix it.

• 9:31Dave Meyer?

  Look at what your deductible to is on that insurance too. Because if you have a $5,000 deductible, you gotta be able to cover that. And a lot of people make that mistake and think insurance, they just pay. You pay the first deductible, you pay a little bit first. And so make sure you have that covered. This way of thinking about it though, is specifically for a house hack, right? You have, this is for an owner occupied property.

• 9:53Speaker 01

  I would say even for an investment property. Like if you were to partner, I would say, hey, Dave, I'm glad they gave you this money upfront. Let's make sure we have an empty credit card somewhere, just in case you mess something up. Just in case a tenant doesn't pay. Do you have some plan to come up with the difference with your partner? Cause you gave them this great presentation.

• 10:15Dave Meyer?

  Yeah, you don't want to go back to the well, especially not right away.

• 10:19Speaker 01

  On the first property, ever the first payment.

• 10:21Dave Meyer?

  You want to dip back in the well where you're like, hey, we can throw an ADU on the back of this. This is a great thing we could do, but not because, hey, I underwrote this deal wrong and now I need more money. That's a good point. I, I think that's true for, for partnering. So I think we kind of have like three categories here. If you're following along here and you want to know how much money you need to invest. Like if you are going to do a house hack and use the down payment assistance, like you may be able to get away with just basically your cash reserves. Like that's, that's what you need. Depending on where you live, you might need money for the closing costs and maybe for some part of the down payment. So, but I think reasonably in a lot of places, 10 grand would do that.

• 11:00Speaker 01

  Yeah.

• 11:00Dave Meyer?

  Even with, with expensive markets. I'd say the same way if you're going to partner with people, because you can structure a partnership anyway. And so there's no absolute number, but you can think about it that way. If you're going to go buy a property. Not owner occupy, you're going to probably have to put 25% down on that kind of property. Then realistically, you probably need like 35 or 40 grand. It's probably about the number and even then you're buying a cheaper deal. So I just wanted to put that spectrum out there for people because I know some people knock on house hacking, but I just want to show you how dramatically the amount of cash that you need goes up if you're not house hacking or partnering and you're just doing this yourself.

• 11:45Dave Meyer?

  It's literally probably four times the amount of money.

• 11:47Speaker 01

  Absolutely. And if I can add on top of the cash flow, something else I'd like people who want to invest with no money down to have is space, is financial space in their regular budgets. Because for, like Dave said, for that bigger property, having 35,000, maybe that feels a little inaccessible on top of the 25% down payment. But if I have great credit, I can access a credit card for 0% interest for 18 months, for 24 months, right? I'm in the middle of some big stuff for my social media business and the first thing I did was like, oh, let me just open a credit card.

• 12:20Dave Meyer?

  Yeah.

• 12:20Speaker 01

  Because it's 18 months interest free and I can make that money back for sure in 18 months. But that only works because I have great credit.

• 12:29Dave Meyer?

  You don't need it. You're just using this as a financing tool. This is like a financial arbitrage move more than it's leveraging yourself as much as possible and putting yourself in a bad financial position. That is great advice. I have a follow-up question for you. I'm curious your answer on, but we got to take a quick break. We'll be right back. They say real estate investing is passive, but if you've spent a Sunday night buried in spreadsheets, you know better. We hear it from investors all the time, spending hours every month sorting through receipts and bank transactions, trying to guess if you're making any money. And when tax season hits, it's like trying to solve a Rubik's cube blindfolded. That's where Baseline comes in. BiggerPockets official banking platform.

• 13:13Dave Meyer?

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• 15:16Dave Meyer?

  Welcome back to the BriggerPockets Podcast. I'm here with investor Deandre McDonald, talking about how to invest with little savings. We've talked about, really, the relatively modest, compared to what you think you might need to spend on real estate, ways that you can get into this. Deandre, you started as a house hacker. I started as a house hacker. Here's my question to you. People have very different opinions about this. Is there ever an instance where house hacking is not a good option to get started?

• 15:42Speaker 01

  No.

• 15:44Dave Meyer?

  Yes, I love how definitively you answered that.

• 15:47Speaker 01

  So let me give you right now, I just bought my dream home and you know what it has in the basement? A full apartment. And you know why it has a full apartment? Because house hacking isn't only to make money. Sometimes house hacking allows your parents to live with you and be able to retain their independence, but also you can keep an eye on your people. Sometimes house hacking allows your children to practice in a way that they couldn't do in a safer space and not be out here paying money to all these people. Sometimes house hacking allows you to support your friends in their times of need. I always think it's a great idea.

• 16:19Dave Meyer?

  That's such a good perspective on it too. Like, I love how you presented it as flexibility. It's not, you know, if you want to rent it out full time, do it. If you want to rent it out as a short-term rental, do it. If you want to do it with your family, do it. Like, it just gives you an option or just like unlock the door and live in that space some of the time. Like, it's like, there's so many different ways to do it. So I'm full on board with house hacking. I think especially in today's day and age, rent is so expensive and so are homes. Like, don't get me wrong, they are very expensive. But rent is so expensive that this ability to lower your living expenses

• 16:59Dave Meyer?

  and to, like you started the show with, control that living expense and know that it's going to be fixed instead of variable where your landlord could change your rent at any point, as they probably will, because that's just how the business works, that like you can get control of that. So I love that. So what other options you think for folks who have little to no savings that are worthy of considering?

• 17:24Speaker 01

  You had mentioned partnering. I think of my larger multifamily buildings where one of the things I've started doing, if I have a 10-unit or larger, is hiring a live-in handyman. And one of the things I've started to play around with is a split, a profit split and not just a payment. Not just like an income. And I think of partnering is not just I live in the home, but like I take care of it. Right? Like I'm, I'm not just, oh, I'm down the street if they need me. No, I'm in it. I think that gives investors with a little more capital, a little more safe feeling about what's going on with their property, knowing you're sleeping in it. You're running the water. You're hearing that dog upstairs is not supposed to be there. I can see how I for sure will be much more willing to invest with you in a different state.

• 18:10Speaker 01

  If I knew you were on site and not just in the city.

• 18:14Dave Meyer?

  That is the challenge with partnering, right? Is I get approached frequently. And it's not that they're bad people. It's not that they have no savings. It's usually that they have no experience is the thing that would make me not want to invest with them. And so I think you just have to be realistic. If you're looking for a partnership, you're gonna have to put in something, some sweat equity. I wrote like a whole chapter in my book about this because I think it's so important. It's like people think that they can create a portfolio out of nothing.

• 18:45Speaker 01

  Yeah.

• 18:45Dave Meyer?

  You're the scientist here. It is literally a rule of physics that you cannot create something out of nothing. You have to put some input into it. And so if you don't have savings, that's okay. I started in a similar situation, but I basically worked for free to earn my equity for several years as a property manager. So you can do something like that. The idea that you're going to find a partner who's going to give you some sweet deal with huge upside when you have no experience and no capital is probably not going to happen. Like maybe friends and family. There might be like, if you have like a friend or someone who's wants to help you out. But if you're going to someone who's viewing it as an investment, you're not going to get that.

• 19:26Dave Meyer?

  And so I think that you just need to sort of figure out in a partner, like you're not going to have any leverage. I'll just be honest with you. Like you're not going to be able to negotiate anything because the other partner is going to have a hundred different operators who that they can choose to invest with. So I really just recommend figuring out ways that you are going to do it. Deandre just provided a good example. Like, are you willing to live in the property and be the handyman for a couple of years? That's essentially what I did. First five years of my, my career, I essentially did that. I was a terrible handyman, but don't tell my, that my partners don't listen to this podcast, so it's fine. But I just think that that's just an important like expectation setting.

• 20:05Speaker 01

  Yeah.

• 20:06Dave Meyer?

  And that's okay, because the whole point is just to get in the game, to learn, to move on to the next one. But I think you need to know that if you're coming into little savings, that like, you're gonna have to find the thing that you can contribute to a partnership.

• 20:18Speaker 01

  One of those things can be exposure. You said you were in that for five years. Remember the down payment assistance we talked about? If you got a multifamily and then showed people for the next three years, how you take care of that multifamily.

• 20:30Dave Meyer?

  That's right.

• 20:31Speaker 01

  You now have experience and they have trust that you commit to this thing. So that's a way to get that exposure to these private lenders. So they can come to you and say, oh, I've been watching you do this thing. Can you do it again now with me? Instead of again, you showing up day one, zero money, zero experience, and maybe zero desire to put anything on the table. That would be a way to convince them and convince yourself that you should take on these bigger projects.

• 20:59Dave Meyer?

  What do you make of creative finance or seller finances options for folks with little savings?

• 21:06Speaker 01

  Anytime someone doesn't have money, my first question before we get creative is why? Why don't you have any money? And I mean that as a teacher, because you're gonna repeat whatever got you into this space again. So if you overspend on your regular life, you're overspending on that flip. I promise you, you are. You're not checking tile prices. You're not checking what that carpet costs, because that's not how you live your regular life. If you like to bet it all, you're gonna get that property that's been on the market forever and think that foundation work is just a few paint and it's gonna be terrible. So if you have no money because your habits are bad. I don't want to talk to you about creative nothing.

• 21:48Dave Meyer?

  That's

• 21:48Speaker 01

  I don't want to engage with you about this. And you said something earlier too about borrowing money from friends and family. It starts to get a little predatory if you are in your mind saying, I don't know what I'm doing, but I'm going to lean on the love of my people in order to gamble. And I don't think that's it. If you don't want to spend your money, then yeah, we can talk creatively, right?

• 22:11Speaker 01

  That's funny. You don't want to spend it. I like seller financing, especially now with interest rates so high. Right? At least for us to pay interest in the loans. This is an opportunity for the seller to get a six, seven percent return where they are not getting that, at least the low level, low risk markets, right? In the CDs and the money market accounts. So I would say go for it. If the property, for some reason, there's some upside that you want to delay getting a longer term loan, absolutely offered if they got it. But in lower markets, I'd say, oh.

• 22:42Dave Meyer?

  Yeah, right.

• 22:43Speaker 01

  We better like solidify with traditional financing.

• 22:46Dave Meyer?

  I agree. Yeah, you know, I'm, I'm not an expert in sub two. I do have some questions about it. I, I think if you really understand and you do it legally, it's a perfectly, perfectly viable strategy. I think for new people, it's, it's challenging and there's risk that comes with it that I think you need to consider, like any investment. For my wife's birthday, I wanted to make her a new website for her landscape design business. So I researched a lot of different options. I tried out a couple, but honestly, it was really overwhelming. It was pretty time consuming and still the site wasn't coming out the way I wanted it to. Then I tried hosting her and everything was super simple.

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• 24:09Speaker 02

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• 25:42Dave Meyer?

  I just wanted to touch on a couple of things that you brought up earlier, which I love what you were talking about, how people, if you have bad habits, that you're going to repeat them in real estate. I think that makes so much sense. I hadn't like honestly, never really thought of it that way. And it made me want to bring anyone I consider lending money to Vegas and just like wash them on the tables now. Like, let's just give them a hundred bucks. See what, see what they do with that money. You're going to learn everything you need to know about that person. But I also think the, the, the thing you touched on about friends and family is like super important to me. And I think I've unfortunately get a lot of people reaching out to me trying to untangle these situations where they've already done this and it has

• 26:25Dave Meyer?

  turned ugly. And let me just tell you, it is not worth it. It is not worth getting your first investment if you are risking a relationship with friends or family. And I agree with you that it's like, yeah, you want to get in on these things, but people get weird about money. And, or they might be right to get weird about money with you if you're not spending it reasonably. And if you're going to do this and raise money with friends and family, I know it's awkward, but just go through the effort of formalizing everything. Write it all down. Get an operating agreement. Talk about what happens if things go wrong. Talk about what happens if you run out of money and you need to ask them for more. Walk through every one of these situations because then, sure, if things

• 27:08Dave Meyer?

  go bad, it still sucks. It's just going to suck. But it will suck less because at least everyone understood what they were getting themselves into. You have a protocol for dealing with this problem and you can move on from that, hopefully in your relationship. So I know, I totally agree with you. I actually am a big fan of partnerships. I partner on a lot of my deals. It sounds like you are partnering with 50 people right now. It is a great option and every real estate investor I know does it. Like it's not weird, you know, it's very common. But again, I just want everyone to think these are formal agreements. Treat them like a business and think about what you can offer in these, in these deals because it's not just like, hey, I'm going to show up because I went on Zillow and found

• 27:52Dave Meyer?

  this pretty picture. You got to really think of this. Put yourself in the, in the other investor's shoes. If they, if you had money, what would you expect from someone who wants to borrow that money from you to bring you? I would think you would expect a detailed business plan and a lot of commitment and a lot of evidence of their work ethic. And so just think about it in that perspective and you really can raise money and do these things, but you got to be professional about it.

• 28:18Speaker 01

  A hundred percent. And if I could add one more piece about seller financing, it's something I have started to offer a lot. And I think we talk a lot about creative financing from the buyer's perspective and not as often about seller perspective because some another way you might not have money is you got inheritance. You're sitting on some property, you're sitting on some land and maybe you can sell it outright, but there's something real sweet. I've been watching my eight percent checks come in. I've been watching my 10% checks come in all.

• 28:45Dave Meyer?

  And it is. 10% on seller financing?

• 28:48Speaker 01

  Look, we agreed to what we agreed to. You know what I mean? So and it comes in and it's wonderful. I own the properties outright. Now their names are on it, but I'm the lien holder.

• 28:57Dave Meyer?

  Yep.

• 28:58Speaker 01

  So it's and they paid a good chunk upfront. So if something goes bad, I get those properties back. But I have a few properties I want to sell now that I essentially only want seller financing. I want to spread it out over 15 years. I'm I'm I got time.

• 29:10Dave Meyer?

  If you can get ages 10%, I can understand why you've done it. I own a property outright and you know, people build these lists where they can see these things. And so some people have approached me about seller financing and they're like, you know, rates are so high. They see it as like seller financing as the way to get a lower rate. I'm like, yeah, I'll give you a 5% interest rate, but you're going to pay me 10% more than this property's worth. And they're like, why would I do that? I'm like, why would I do that? Why would I?

• 29:36Dave Meyer?

  It's again, it's like put yourself in the other person's shoes here. Like, why would I give this to you at a lower rate than a bank is going to give you at the same price? I could just sell it and get all the money now and then go invest that somewhere else. But yeah, I'm interested in it. I think it's if you own places free and clear, it's it's a pretty interesting idea. So I think we we've established here, house hacking partnerships, really good ways that you can go about doing this. Are there any other things that we're missing here for, you know, how to guide for people with little savings?

• 30:09Speaker 01

  Again, this will be an assumption that with little savings comes little experience. And so I would really say to that person, one of the things you can give is going after the properties that nobody wants, but not overwhelm yourself going too big at once. So even with that down payment assistance, we've been talking about maybe not going for the quad day one. If you have no experience with anything, right? Or make sure you have a mentor or someone on your phone that you can call to and ask for help because it might be a little too much.

• 30:40Dave Meyer?

  Yeah, that's fair.

• 30:41Speaker 01

  On the first day. But if you can get those condos or those townhomes that may be a little further out of town or not as big as everybody else wants and hold on to them a little bit, in a few years, you will have money because you will have equity. The property will appreciate in most markets for you to do something with. So maybe holding the right expectations for what that no money down property looks like.

• 31:04Dave Meyer?

  Yeah.

• 31:05Speaker 01

  Sometimes we think it looks like the dream home. It looks like the dream rental and that is not always the case.

• 31:12Dave Meyer?

  I like that a lot. I think appropriate expectations is 50% of this industry. It's like so much of it. Everyone's like, I want the perfect burr. I'm going to flip this house and make 100% returns. No, you're not.

• 31:24Speaker 01

  Immediately. In 60 days. That's too long.

• 31:26Dave Meyer?

  I hear people like, oh, I didn't do well in my first flip. I had 30% return. Like that's triple the stock market and you did it in six months. That's literally six times better than anything else you could have done with your money and you're mad about it.

• 31:37Speaker 01

  With the highest interest rates.

• 31:39Dave Meyer?

  Yeah, right.

• 31:40Speaker 01

  Buyers have seen.

• 31:41Dave Meyer?

  Exactly. That's why I always say this, I'm a broken record. You probably don't hear this all the time, but on the show, it's like, if you just commit to seven to 10 years, you're going to be good. Like, that's it. Like, just commit to seven to 10 years and take it slow. It's not even that slow. It's fast. Like, that's just a totally reasonable thing. And the only reason you would mess up and not be able to pull it off in 70 years, if you try and go too fast and you burn out on your first deal or take on too much risk or put yourself in a worse financial position because you take on too much. So I love that advice of just like, taking out something appropriate for you at your given stage, you're going to learn so much. And then next time you can take a little bit bigger bite and then a little bit bigger bite.

• 32:23Dave Meyer?

  If you do that for five, seven, 10 years, you're going to be good. So I think that's a really good thing to end on. But we can't get out of here. I want you to lie to me again. Tell me what you're doing next. I want to get it on camera so that next time you're here, we know if you lied or not.

• 32:42Speaker 01

  That's really funny. I think right now, honestly, it's about stabilizing these joint ventures because even with those, I wanted to go as big as I could in terms of the building, but I knew I had some cultures to reset. I knew I had some units to turn over. So this is going to take three to six months of effort in order to get these properties operating the way I want them to. But I think the dream would be for next year to scale larger with the joint ventures. There's a lot of like 15 to 25 unit properties in my region that those prices keep dropping because nobody wants them and I don't want them yet.

• 33:17Speaker 01

  But once they get to that number I'm looking for, I feel more comfortable moving forward.

• 33:21Dave Meyer?

  I love it. If you didn't listen, there was an episode of the show, maybe in May, with Brian Burke. He wrote a book for BiggerPockets called The Hands Off Investor a couple of years ago. He does a lot of syndication deals, but he knows more about multifamily than anyone I've ever met. And he said, he was like, the 12 to 25 unit is the sweet spot. He's like, right now, that's where you should be buying. It's, I've been looking at a couple of them the last couple of weeks. Yeah, I think it's just, if you can pull that off, if you have the experience and the capital, you've put in your time to earn your way up to that, it's a really good thing to look at. So next time, we're going to hear how you've scaled that.

• 33:59Speaker 01

  That's right.

• 34:00Dave Meyer?

  Well, thank you so much for being here. It was a lot of fun to have you.

• 34:03Speaker 01

  Thanks, Dave.

• 34:03Dave Meyer?

  And thank you all so much for listening to this episode of the BiggerPockets Podcast. We'll see you next time.

• 34:08Speaker 04

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