Rental Property Investor · Napa, CA · Member since 2021 · 12 posts · 5 votes
Hey guys, looking for some advice here. Where I live in California, it just simply isn’t realistic to buy anything with the salary I make currently. I live at home rent free and I know I want to get into the real estate game ASAP especially while interest rates are low seeing as they may rise soon. I was looking into purchasing OOS, particularly in the Georgia/Tennessee area.
My question:
Is it frowned upon by banks or loaners to have my first purchase as a rental OOS? Or would it be okay considered my down payment would be well over 20% and the total loan amount would be less than my annual salary because of the cheaper real estate?
Real Estate Agent · Skagit Valley, WA · Member since 2021 · 256 posts · 283 votes
4y
Lenders won't frown because your first purchase is an investment property. They're interested in qualifying you and your financials as well as the property. 20% (or more) downpayment on a conventional loan for an investment property would be fine - as long as you qualify.....
but because of the higher downpayment and interest rates for a loan like this - most investors DO begin their investing through househacking a primary residence with a lower downpayment and better interest rates. In your case, Georgia or Tennessee might be just the ticket...
Real Estate Agent · Skagit Valley, WA · Member since 2021 · 256 posts · 283 votes
4y
Lenders won't frown because your first purchase is an investment property. They're interested in qualifying you and your financials as well as the property. 20% (or more) downpayment on a conventional loan for an investment property would be fine - as long as you qualify.....
but because of the higher downpayment and interest rates for a loan like this - most investors DO begin their investing through househacking a primary residence with a lower downpayment and better interest rates. In your case, Georgia or Tennessee might be just the ticket...
Lender · OR ID AZ CA WA CO NV TN MT · Member since 2018 · 598 posts · 312 votes
4y
@Kevin Tunnell Lenders are looking at credit, DTI, and assets. Whether you are buying in or OOS does not matter. Conventional guidelines require 15-20% down for a 1 unit, and 25% down for a 2-4 unit, but there are also portfolio loan solutions with just 10% down and no MI for 1-4 unit properties. Definitely something worth looking into to scale your portfolio if the downpayment is your biggest barrier to entry.
Rental Property Investor · Napa, CA · Member since 2021 · 12 posts · 5 votes
4y
@Tim Johnson Thanks for the advice! It sounds like as long as I have all my eggs in order ie: property value, cost of repairs, projected rental income, insurance, etc. and I qualify for the loan, then they shouldnt have an issue loaning me the money correct?
Rental Property Investor · Napa, CA · Member since 2021 · 12 posts · 5 votes
4y
@Grant Schroeder Ooo, that’s good information, thank you Grant! So, as long as I’ve got my down payment, somewhere in the ballpark of 25%, and my income qualifies me for the loan, I should be able to purchase OOS with little issue?
Real Estate Agent · Columbus, OH · Member since 2020 · 1k+ posts · 1k+ votes
4y
There are tons of people who invest OOS and if your bank/ lender isn't comfortable with it, I would just use a local bank of whatever market you are planning to buy-in. @Kevin Tunnell
Investor · Washington, DC · Member since 2017 · 428 posts · 205 votes
4y
Hey Kevin, as others have mentioned already, you shouldn’t have any issue as long as you qualify for the loan based on your credit, debt-to-income, and have money for a down payment to qualify for an investment property loan. I’ve helped numerous clients purchase out of state investment properties rather than a primary residence due to living in a high cost area like Cali. That being said, if you cannot qualify in your area on your income alone, another solution would be seeing if your parents would co-sign if you’re interested in buying locally, which I’ve found to be easier personally when buying my first couple of houses.