First Time Investment Property Finance

I have read a lot of first time investment property stories about trying to finance that first property and coming up short on funding. My opinion is that if it was easy to acquire the properties everyone would be doing it and there would be a higher failure rate on actually managing the investment property.  The amount of effort and capital it takes to finance the property is a good first lesson in what it will take to successfully own and manage the investment.

Much of the chatter I see revolves around the inability to raise capital due to slow or poor credit and the inability to come up with the average 25% down payment on the investment property. I observe that most of the persons frustrated with the inability to purchase are just starting out in their adult life (early to mid 20’s mostly). I reflect back on the first time the investment property bug hit me in my mid 20’s. At the time I was the proud owner of a Sears credit card, drove an 8 year old used car, rented an apartment with my future wife and still had student loan debt.

There was simply no way I could have afforded that first investment property and new I would have to slowly build up my credit. This took a few years to accomplish but when an opportunity to buy a large duplex for a manageable price came up,  I was ready. I will confess that family gave a small boost financially so we could purchase, but it was our good credit that got us that first loan. The property was beyond dated and would take years of projects to bring back from decades of neglect.  In fact for some time the side of the duplex that we lived on, (being the worst of the 2 units) did not exactly have a full bath. We saw the potential of the property beyond the cosmetics (which again were in each and every room) and new that we could handle the investment property, save money on personal housing costs and boost our credit tremendously.

We began our investment property adventure in our late 20’s. Any extra money available in a given month was easily consumed by project costs; sheet rock, paint, flooring, appliances and so forth. The projects also consumed a lot of time, just about any free time we had. I am glad we started youngish, as I believe It would be much more difficult to go through the same experiences in our  late 40’s-early 50’s. I am not as sprite as I once was and we have two kids now.

My comment to first time young investors is that acquiring that first investment may take a few years of planning, but once you have the resolve to go down the property investment path, you will find a way to make it happen. The hard part often follows the purchase, having the resolve to get your hands dirty, invest more money into the property and give up a good chunk of your free time. If you are into expensive footwear, love to dine out often and have big travel plans for your free time, do yourself a big favor and hold off on buying that first investment property!


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