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5 Ways to Finance Your First Investment Property

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Last Updated on June 7, 2022 by lindseymahoney

Thanks for tuning in to episode 6 of From the Nest Podcast! On today’s episode, Chris and I are discussing 5 different ways to finance your first investment property.

How to finance your first investment property

1. Conventional Loan:

This is probably the most obvious option when getting started in real estate investing. However, you may have limited buying power depending on your debt to income ratio.

For us, we are more limited. This is because we went from two W-2 based incomes in Denver down to a household with one W-2 income in Ohio. We are more limited with our buying power when it comes to conventional loans and need to get a little creative as we purchase more and more properties.

2. Refinancing your home:

  • Cash Out Refinance – Refinance and pull cash out to make improvements on the home or invest in other properties
  • HELOC “home equity line of credit” – This is a loan set up as a line of credit for a maximum amount to withdraw, rather than a fixed dollar amount. You don’t have to take it out all at once.
  • BRRRR Method: “Buy, Rehab, Rent, Refinance, Repeat”
    • Buy the property
    • Rehab the property
    • Rent
    • Refinance (usually after 6 months)
    • Repeat the process with the money you pulled out

3. Self Directed IRA:

Some financial institutions allow you to give a loan to yourself utilizing your 401K funds. With this option, you pay yourself back with interest. We utilized this tool when purchasing our second home and we needed some more cash for the down payment.

4. House Hacking:

This tool is essentially a way to get scrappy and make some extra cash to start investing! We had a renter for two years in our second home. This helped us pay our mortgage and save for investments. We are also currently living at my in-laws home to allow us to qualify for more conventional loans.

5. Private Lenders:

This is when you borrow from lenders that are not a financial institution, usually friends and family. We are looking into this for future investments as we build our portfolio.

Check out our first buy and hold property and fix and flip property we purchased in Toledo!

Show Notes

Tips of The Week…

Chris: When you are painting a house whose previous homeowners were smokers, use Kilz. This will allow for the regular paint to adhere to the surface. When Kilz is not applied, the regular paint will not stick to the surface.

Lindsey: Three great online tools that we utilize are:

  • Thumbtack: For finding contractors, house cleaners, garden pruners, etc.
  • Turbotenant: For screening and finding tenants for your income property
  • Redfin: For finding comps on properties

If you enjoyed this episode, don’t forget to subscribe, rate and review us on iTunes! Thanks for listening!