Right.
Like, especially living in New York, I thought, like, I'll never buy a house.
Like, if I do buy a house, like,
especially like you need $150,000 down payment for 20% down in New York.
Right.
So to me, it was like for rich old guys, like that's what I thought
real estate investment was.
I tried and failed at a lot of different real estate investing strategies again.
Being in New York, it was really hard. I couldn't.
I tried all the different strategies and methods and sure enough,
I joined my local real estate investment association and there's the head of the,
the, the local older aside one day and I said, hey, listen, Melissa, like,
you know,
I've heard of all these different strategies
and how would you get started if you would do this?
Like, I don't have much money.
And she said, what I would do is I would use something
called the two or three kaylon and I had never heard about that.
And years and years of, of, of looking into it.
And I said, what's a two or three K alone?
And she said, Well, what it allows you to do
is it allows you to purchase fixer upper properties.
Now it's an owner occupant loan, it's an FHA version of a rehab loan.
But what you can do is you can buy a fixer upper live in the basement.
Basements are big in New York.
Live in the basement, rent out the upstairs,
live for free and do the renovation and build equity
into that deal and use that equity to go and repeat the process.
Right.
So I and then she told me, you know, I was like,
oh, well, what do I need for a down payment?
She said, three and a half percent is what FHA requires three
and a half percent of the purchase price plus the renovation.
And I'm like, she's like three and a half percent. You can do right.
You might already have it right now.
So my mind exploded.
I didn't know it was a thing.
And and what was crazy, again, was that looking for years, trying
to get into real estate, not having not having knowledge
that I could even buy a house, even even as an owner occupant
for three and a half percent down was kind of my mind boggling to me.
And that's where that's where it really started.
Yeah.
I mean, throwing out percent is such a small down payment.
Like most of you could get a second job and get three and a
half hours, you know, save some money and get three and a half percent down.
But secondly, as you found out about the two or three K alone,
because you networked with other real estate professionals,
because I you know, I think that's so important
because everyone how do I get started with no money?
How do I do this with no money?
Well, I think the first thing is to meet with people that are doing it
so that you can get good tips and advice like you did with the two or three CLO.
Right, especially with the local REIA. Right.
And I have, you know, there's good and bad that comes from local areas.
You know, at the at the end of the day, you want to make sure
that there's something some value you can bring. Right.
And, you know, for me, I was you know, I was joining everything.
I was I was really engaging myself.
And I think that's why Melissa confided in me.
But, you know, like you said, you know, when you get to see what people
with the boots on the ground are doing, it opens your mind up right again.
Having four years trying all different things of like,
you know, again, reading all sorts of books and
and different strategies and wholesaling and and no money down
and seller notes and all kinds of stuff, never hearing just this one thing.
And all it took was one visit to a, to the local meeting one night.
It's not like one aha moment.
You watch one video, you go out and do it and you nail it like it's there's all
these things from a personal development standpoint that led you to that meeting.
Absolutely.
And I think that's also why I carved
why I made the 203k worked so well for me.
Right.
Because at the end of the day,
the two or three K loan is, is, is there to help you renovate your house.
Right.
You don't necessarily need to, you know, be an investor to do this, right.
You can use this loan to buy a buy it, buy your own house
and factor in the renovation costs so you don't have to pay out of
out of out of pocket to renovate the kitchens and bathroom.
Having learned so much about real estate investing over
over the years of teaching myself and everything,
when I looked at what you can do with the two or three kaylon
the low down payment, low interest rate,
you know, we can get into more on how you're able to buy up to a four unit,
still only with three and a half percent down the ability to live for free,
all these things, it's all kind of occurring to me like,
holy cow, I can really leverage this thing, right?
Because I was used to like talking to hard money lenders at the time.
They wanted 30%, you know, equity upfront.
And for me, again, that would be 100, 150,000.
That wasn't that wasn't in the cards.
But three and a half percent in my market was, you know, ten grand.
So, you know, that was what that was what really made me feel like,
holy cow, this is a really good opportunity
to take advantage of, especially being in the position I was in.
So break it down a little bit.
So a two or three K loan.
Do you have to be a first, first time home buyer to do it?
No common misconception.
So the only the only requirement is that you are going to be occupying the property
and it's going to be your new primary residence.
Essentially, this is house hacking, right?
So I actually found out about how sacking by accident.
And also I also found out by accident that you were able to purchase
multifamily properties.
And then one of these properties that popped up
was definitely the ugliest property on the MLS at the time.
My mortgage, my loan officer, while we're going through these,
he said, Listen, this is illegal to family.
I said, okay, what does that what does that mean for me?
He said, Well, because because, you know, the price it was listed at at
the time was like, you know, 300,000 or something like that, 290,000.
Again, this thing was in bad shape, like real bad shape.
So he he said, well,
listen, with an FHA loan, you're able to buy up to a four unit.
And what you can also do is you can forecast the future rental
income of the other unit to your debt to income ratio.
So essentially you're able to get approved
for significantly more than you would buy on your own.
So what happened was I wasn't able to even get approved for it by itself.
I think maybe I would just get it.
But when you factored in the renovation costs,
which get tacked on to your loan amount,
which was about $80,000, I ended up picking up the property.
So this is the property I ended up picking up.
It was 270,000.
I was only approved for about 290 or 300.
That bumped me up to over 350,000, which was which
allowed me to purchase the property plus get the renovation budget.
I needed to completely renovate the house so that was an awesome thing.
Was like number one, again, you know, I'm building the equity, right?
So you're doing like a better strategy.
You're, you're, you're, you're buying the property and building equity into it.
And then what you're also doing is you have the opportunity to live in one unit.
And I was renting out the other while I was there,
and pretty much it was covering all of my monthly payments.
Action begets action, right?
Like so doing something will just cause momentum, right?
You know, there's a there's a great quote.
It's like a stoicism quote for philosophical quote,
The obstacle is the way I'm sure you've heard of it before.
And it's something that I really focused on from that moment, especially
through the two or three day process.
Again, we could get more into.
But, you know, the beauty of the process was that
I was able to just focus on what was in front of me and that was it.
And that that removed all the other analysis, paralysis in the stuff.
The fact that I only had to focus on what was in front of me
and having to having to go in headfirst
into this, I was able to really just just make it work.
Does any bank do this
or do you need to shop around for banks for this kind of loan?
So this is so this is like the number one question, right?
And probably the number one thing I get asked.
And one of the reasons I actually started this community so
I love them.
You know, we're friends now and everything.
But I learned out very quickly that he he didn't know the two authors.
Jay And nobody.
No, and nobody in his office did.
And I found that out the hard way.
So a lot of issues that we ran into during this process in getting approved
and getting the loan and all that process
I realized doesn't have to be that bad.
Right.
And that the reality of the two or three
K is and a lot of the stuff that a lot of the
the myths and stuff that come from that are it is a complex loan.
Okay?
It's not that complex in the sense that once you know
how to use it, it's really it's pretty clear cut.
The problem is, is that if you don't give it the attention that it needs,
then it could blow up in your face. Right.
I always say, like with great power comes great responsibility with this loan.
Right.
This, in my opinion, is the most powerful form of leverage
you can get as a as a first time home buyer, as a owner occupant,
as someone just buying real estate. Right.
Because what it allows you to do
is it allows you to buy a property, take ownership of a property,
plus get the bank to lend you basically up to what you're limited
to on your pre-approval in funds to do the renovation.
So none of this stuff comes out of your pocket.
Really. All the risk is falling on the bank right?
So because of that,
yeah, there are some extra steps and things to do in the process.
But when it comes to lenders, what I found out obviously after doing it
and having it done a couple more times and networking with people is that there's
there's mortgage officers and brokers out there that specialize in this.
And that's really what you want to look for.
You know, a lot of that in my community and telling people is like the number one
thing is just get an experienced 203k renovation lender.
Right.
And there's many of them in their ma in your ma in every market,
you just have to find them.
One cool trick I like to tell people is because it's all public info
with a two or three k loan, you're able to google 203k
endorsement summary and what that that will bring up the first website.
It's the HUD website.
You go to that website, you scroll all the way down to the bottom
in the most recent month in year,
what it does is it lets you know of every brokerage
and how many two or three K loans they wrote in each market across the U.S.
So what you can do is you can go on there and go scroll through
and see like, oh, you know, Loandepot did
five of them in my market in the last two months, right?
And then there's so you can go and then call Loandepot and say, hey,
you know, call your local Loandepot branch and say, hey, who heads up
the renovation department in your in your brokerage?
Then you can go and speak directly to the people that are experienced
with these renovation loans.
And you're you can have a much easier time than I.