Creative Funding for My next purchase - How to get snowballing?

Question

I currently own one rental and my primary home. I want to make a multi-family move but with my current income/debt ratio I'm not getting enough monthly to make a purchase. I want to explore an FHA Loan for this. Should I look at more lenders? I feel like my situation isn't going to change until I pay off my debts (student loans, HELOC) but I feel like there's something I'm missing. Any advice or suggestions on laying 3-5% and doing things wisely in my situation?

Chris Seveney · Answer

@Matthew Wienclawski

The wise decision is to have the money not only for the down payment but in a multi what if you need $10k in repairs ? Can you afford it? Can you carry six months of vacancies in your units?

People make it sound easy on BP but notice you don’t hear from the people who lost everything on hear because they were over leveraged

Mirtis Sison · Answer

What kinds of loans do you have on your properties? I'm not sure if an FHA loan will help as those can only finance a primary residence. If you have more than one loan, you can refinance both loans into one and make it easier to pay off. And if you have equity on both properties, you can find a lender that will use that to give you a zero-down payment loan. I recommend getting a pay raise or a second job while you're doing this, since you would still have to pay off the debt either way.

Paul De Luca · Answer

Talk to a few different lenders but it does sound like you need to pay off some down some of your debts. You might be able to qualify if you have a co-signer as well. If you need a lender recommendation, send me a PM.

Nathan Gesner · Answer

Get complete control over your personal finances before investing. Most people will tell you to pay the minimum on the debt and use your extra cash to invest. If you pay 5% interest on the debt but have a rental making a 10% return, then you will be 5% ahead, right? Wrong! Do the math with two different scenarios and you'll see that the best option is to focus your effort on paying off the debt first, then investing.

Calculate the results on two scenarios:

1. You pay the minimum on your student loans and put anything extra into investments. After the loans are eventually paid off, then add that to your investment plan. Where do you end up in 20 or 50 years?

2. Pay the debt off like a madman. If you work extra hours, get $20 in your birthday card from Aunt Gertrude, or pick up a nickel off the ground, you put it toward the debt. After you've paid off the debt completely, start using that same hustle to invest. Where do you end up in 20 or 50 years?

Math don't lie. Debt will result in less wealth, and it holds you down in a variety of other ways. True wealth - like anything of value - comes with hard work and sacrifice. Don't think you can shortcut your way to success.

Creative Funding for My next purchase - How to get snowballing?

Creative Funding for My next purchase - How to get snowballing?

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