I don't have the 20% down payment required for an investment property

[SustainableStache]

I'm just now maxing out my 401k, my wife's 401k, and our HSA. We're starting to fill up our traditional IRA accounts. Once our salaries increase enough to fill those IRAs each year we'll move on to a taxable account - and invest in real estate with those funds when I have 20% down. I'm now wondering if I could start investing in real estate now by trading my excellent credit and access to low interest long term mortgages to an investor for a share in the equity in a deal. Is what I have (full-time job income, fantastic credit, favorable interest rates) useful to an investor who's hit their mortgage lending limit?

[tralfamadorian]

Yes, potentially you could look into partnerships. However, IMO, you would not be bringing the most important components into the situation- down payment money or experience. Without one or the other, it can be difficult to find someone willing to work with you (who you want to work with!).

Could you start a side hustle to help you get your down payments faster? 

[SustainableStache]

You're right, I'm new in the sense I've never invested in real estate on my own. However, my day job is a project manager buying and selling cattle ranches. A large part of my job is negotiating with brokers and getting people 5 hours away to do their job on time and under budget. I'm also comfortable with all levels of due diligence review.

I thought of this idea in my personal life because a rancher looking to buy a property from me (my employer) said he was bringing in "Joe" (a teacher with a stable income and good credit) to help get favorable loan terms and increase the purchase offer. A light bulb went off for me - "oh, maybe I can be 'Joe' for an investor."

[thd7t]

Do you own your primary residence?  Could you leverage that?

[SustainableStache]

We do own our home but there isn't much equity. It's worth ~$134k and I owe $99k.

[LightStache]

I'm just now maxing out my 401k, my wife's 401k, and our HSA. We're starting to fill up our traditional IRA accounts. Once our salaries increase enough to fill those IRAs each year we'll move on to a taxable account - and invest in real estate with those funds when I have 20% down. I'm now wondering if I could start investing in real estate now by trading my excellent credit and access to low interest long term mortgages to an investor for a share in the equity in a deal. Is what I have (full-time job income, fantastic credit, favorable interest rates) useful to an investor who's hit their mortgage lending limit?

To answer your question directly, no. A full-time job, fantastic credit, and favorable interest rates make you a responsible adult, but don't bring anything to a RE deal. If an investor has hit the 'limit,' they are probably wealthy enough to get financing by other means.

Have you run the numbers on an alternative where you're only contributing the match for 401(k) and saving the difference for RE? I maxed out my 401(k) last year. Then I looked at just contributing 6% to get the match and saving the rest for RE. If I get 15% cash-on-cash returns in a leveraged RE investment over ten years, that beats out 401(k) at 8% assuming my eventual 401(k) withdrawals would be at a 10% lower rate than I'm in now.

[clarkfan1979]

20% down for an investment property is low. I think the norm is 25%.

Stick with it an you will eventually get your down payment together. I think real estate is a great long game. If you are impatient you will get burned.

[srad]

Its 20% for your first 4 mortgages, 25% for property 6-10. 

If you are serious about Real estate, i'd look at limiting your contributions to the retirement account and start saving for the 20%.  Or get your side hustle on sounds like you are in an area where homes are 100k, saving up 20k should be doable  for you.   

[SustainableStache]

Thanks clarkfan1979 and srad. I'm actually in a HCOL area (median home price of ~$700k) - my family is just living in an affordable condo provided by the city to anyone making less than 125% of the city's median household income. While I'm "serious about real estate", my plan for the last 5 years has been to...

(1) pay off astronomical student debt - COMPLETE
(2) max out our HSA and 401k plans - COMPLETE
(3) max out IRA accounts - IN PROCESS
(4) save in taxable account for RE investments

I thought there may be a way to get in the action with "no money down" but it looks like I'll just wait patiently to get there. I'll still plan to go to real estate clubs around my area, continue to network with brokers and ranchers at work, and see what happens. Maybe I can find someone I trust to get me in with what I have now.

[jeroly]

You can also inject real estate into your investment portfolio by getting shares in REITs.
No large down payments necessary.