Looking for the best financing for my first rental property.

Looking for the best financing for my first rental property.

Member since 2023 · 63 posts · 43 votes

I'm looking to invest in my first long-term rental property using the BRRRR method but I am trying to find the best financing options for me. I was originally looking at conventional loans from banks but after researching it will be slow and they don't like investing in rental properties because of the risk and it does a hard credit inquiry every time which will effect my eligibility.

I was looking at hard money loans because they are faster to obtain but they are for short-term rentals and I need something for long-term rentals. Any suggestions?

My goal is I want to buy 200 properties in 5 years(separate business plan) and build even bigger after until I have the biggest real estate empire. I need to become a millionaire in my 20s it’s a requirement and I need to buy my first rental property at age 20 which I just turned 20 so I have less than 1 year to acquire my first property, it’s a non negotiable. I want to get to a point where I am buying properties every day across the world. 

But my first goal is to buy my first duplex and rent it out this year it cannot be later, like I mentioned it's a requirement for me. I will be traveling across the US to a better housing market, I have access to the MLS for every state which is cheaper than hiring a realtor and will make my journey better and faster.

Also I have no income I live on disability and invest that into stocks, I worked a few months in IT and saved everything and quit so I could buy time. My credit score is 765 and I have the best credit history never missing a payment which will help me and my investments.

Where can I find an investor to give me $50,000 to show the lender I have income and a down payment? Also for travel expenses.

What are the best financing options for my situation?

Thank you,

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Real Estate Agent · Atlanta, GA · Member since 2020 · 1k+ posts · 1k+ votes
2y

@Joseph Fenner, so many people forget that the first step of implementing the BRRRR strategy is acquiring the property all CASH. Your best bet is to explore hard money products upon the initial acquisition or work with a private lender and refinance via DSCR or commercial loan. To be blunt, none of this will be easy. For option one, you must understand how short-term debt works. I can't tell you how many stories I've heard of individuals getting crushed by HMLs because they didn't know what they were doing. Option two will be even more challenging since you don't have a valid track record. Therefore, it won't be easy to pitch deals to private investors regardless of how lucrative the deal may seem.

If you are serious about this endeavor, you must become a pro in deal analysis and underwriting. Practice analyzing deals daily while simultaneously building your network of buyers/partners. 

You're young, so I recommend slowing down before you acquire much debt. You still have time; this isn't a get-rich-quick business. 

Good luck! 

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  • Rental Property Investor · North Palm Beach, FL · Member since 2018 · 2k+ posts · 1k+ votes
    2y

    @Joseph Fenner

    You can search out DSCR lenders and loans if you cannot show income. But, it is important to note that if you are looking to build a portfolio of rental properties, local banks, and credit unions are still going to be great places to start building relationships since they traditionally loan on local rental properties.

  • Member since 2023 · 63 posts · 43 votes
    2y

    Do hard money lenders offer DSCR loans?

  • Lender · Saddle Brook, NJ · Member since 2023 · 431 posts · 231 votes
    2y
    Quote from @Joseph Fenner:

    Do hard money lenders offer DSCR loans?


     Yes, but they will have very high rates. Better to just go with a traditional lender.

  • Member since 2023 · 63 posts · 43 votes
    2y
    Quote from @Ryan Muska:
    Quote from @Joseph Fenner:

    Do hard money lenders offer DSCR loans?


     Yes, but they will have very high rates. Better to just go with a traditional lender.

    I was originally going to use a traditional lender but it would take longer to close deals, I don’t mind paying the higher rate if I’m getting it fast. Would it be possible to refinance into a conventional loan from a DSCR with a traditional lender without doing hundreds of hard credit inquiries for all my future properties? 
  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    2y
    Quote from @Joseph Fenner:
    Quote from @Ryan Muska:
    Quote from @Joseph Fenner:

    Do hard money lenders offer DSCR loans?


     Yes, but they will have very high rates. Better to just go with a traditional lender.

    I was originally going to use a traditional lender but it would take longer to close deals, I don’t mind paying the higher rate if I’m getting it fast. Would it be possible to refinance into a conventional loan from a DSCR with a traditional lender without doing hundreds of hard credit inquiries for all my future properties? 

    You can refinance from a DSCR loan to conventional yes,

    However be mindful of the prepayment penalty on a DSCR loan. Most Lenders will structure it as a 5.4.3.2.1 declining prepayment penalty, however you may structure the loan without one for an additional fee.

    If your concern is time, why not close with a hard money loan and refinance with a conventional loan?

    LuxePrivate Investments LLC 572 Reviews
  • Member since 2023 · 63 posts · 43 votes
    2y
    Quote from @Erik Estrada:
    Quote from @Joseph Fenner:
    Quote from @Ryan Muska:
    Quote from @Joseph Fenner:

    Do hard money lenders offer DSCR loans?


     Yes, but they will have very high rates. Better to just go with a traditional lender.

    I was originally going to use a traditional lender but it would take longer to close deals, I don’t mind paying the higher rate if I’m getting it fast. Would it be possible to refinance into a conventional loan from a DSCR with a traditional lender without doing hundreds of hard credit inquiries for all my future properties? 

    You can refinance from a DSCR loan to conventional yes,

    However be mindful of the prepayment penalty on a DSCR loan. Most Lenders will structure it as a 5.4.3.2.1 declining prepayment penalty, however you may structure the loan without one for an additional fee.

    If your concern is time, why not close with a hard money loan and refinance with a conventional loan?


     That is what I want to do but I want to ensure that I will still be able continuously refinance into a conventional loan eventually 45 times per year per property without any setbacks due to “Too many hard credit inquiries”?

  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    2y
    Quote from @Joseph Fenner:
    Quote from @Erik Estrada:
    Quote from @Joseph Fenner:
    Quote from @Ryan Muska:
    Quote from @Joseph Fenner:

    Do hard money lenders offer DSCR loans?


     Yes, but they will have very high rates. Better to just go with a traditional lender.

    I was originally going to use a traditional lender but it would take longer to close deals, I don’t mind paying the higher rate if I’m getting it fast. Would it be possible to refinance into a conventional loan from a DSCR with a traditional lender without doing hundreds of hard credit inquiries for all my future properties? 

    You can refinance from a DSCR loan to conventional yes,

    However be mindful of the prepayment penalty on a DSCR loan. Most Lenders will structure it as a 5.4.3.2.1 declining prepayment penalty, however you may structure the loan without one for an additional fee.

    If your concern is time, why not close with a hard money loan and refinance with a conventional loan?


     That is what I want to do but I want to ensure that I will still be able continuously refinance into a conventional loan eventually 45 times per year per property without any setbacks due to “Too many hard credit inquiries”?


    If that's the case, I would work with a solid broker that can do both your hard money loan and conventional loan. There is also a limit on the amount conventional loans you can have. 45 would definitely not be possible with a conventional loan. You can however finance multiple properties with DSCR loans. Be mindful of exposure limits if you are working with a direct lender.

    If you work with a broker, 1 credit pull is good for 90 days. 120 days with an exception.

    LuxePrivate Investments LLC 572 Reviews
  • Real Estate Agent · Atlanta, GA · Member since 2020 · 1k+ posts · 1k+ votes
    2y

    @Joseph Fenner, so many people forget that the first step of implementing the BRRRR strategy is acquiring the property all CASH. Your best bet is to explore hard money products upon the initial acquisition or work with a private lender and refinance via DSCR or commercial loan. To be blunt, none of this will be easy. For option one, you must understand how short-term debt works. I can't tell you how many stories I've heard of individuals getting crushed by HMLs because they didn't know what they were doing. Option two will be even more challenging since you don't have a valid track record. Therefore, it won't be easy to pitch deals to private investors regardless of how lucrative the deal may seem.

    If you are serious about this endeavor, you must become a pro in deal analysis and underwriting. Practice analyzing deals daily while simultaneously building your network of buyers/partners. 

    You're young, so I recommend slowing down before you acquire much debt. You still have time; this isn't a get-rich-quick business. 

    Good luck! 

  • Member since 2023 · 63 posts · 43 votes
    2y
    Quote from @Erik Estrada:
    Quote from @Joseph Fenner:
    Quote from @Erik Estrada:
    Quote from @Joseph Fenner:
    Quote from @Ryan Muska:
    Quote from @Joseph Fenner:

    Do hard money lenders offer DSCR loans?


     Yes, but they will have very high rates. Better to just go with a traditional lender.

    I was originally going to use a traditional lender but it would take longer to close deals, I don’t mind paying the higher rate if I’m getting it fast. Would it be possible to refinance into a conventional loan from a DSCR with a traditional lender without doing hundreds of hard credit inquiries for all my future properties? 

    You can refinance from a DSCR loan to conventional yes,

    However be mindful of the prepayment penalty on a DSCR loan. Most Lenders will structure it as a 5.4.3.2.1 declining prepayment penalty, however you may structure the loan without one for an additional fee.

    If your concern is time, why not close with a hard money loan and refinance with a conventional loan?


     That is what I want to do but I want to ensure that I will still be able continuously refinance into a conventional loan eventually 45 times per year per property without any setbacks due to “Too many hard credit inquiries”?


    If that's the case, I would work with a solid broker that can do both your hard money loan and conventional loan. There is also a limit on the amount conventional loans you can have. 45 would definitely not be possible with a conventional loan. You can however finance multiple properties with DSCR loans. Be mindful of exposure limits if you are working with a direct lender.

    If you work with a broker, 1 credit pull is good for 90 days. 120 days with an exception.

    Wow I did not know there was a limit on the amount of conventional loans but that makes sense, I assume this is per bank/lender?. I never looked into financing with a broker, where can I find these kind of brokers?

    Let me ask if Robert kiosoki from the book rich dad poor dad  is billions of dollars in debt how many lenders is he working with? Who else could he be working with that provides financing that I should look into? Because again I wanna create my own real estate empire. According to my goal who else should I have on my team that would be beneficial? 
  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    2y

    @Michael Dumler

    amen, amen. "if the appraisal comes in low I can negotiate with the HML, right?"

    @Joseph Fenner

    start with a house hack or live in flip.

  • Member since 2023 · 63 posts · 43 votes
    2y
    Quote from @Michael Dumler:

    @Joseph Fenner, so many people forget that the first step of implementing the BRRRR strategy is acquiring the property all CASH. Your best bet is to explore hard money products upon the initial acquisition or work with a private lender and refinance via DSCR or commercial loan. To be blunt, none of this will be easy. For option one, you must understand how short-term debt works. I can't tell you how many stories I've heard of individuals getting crushed by HMLs because they didn't know what they were doing. Option two will be even more challenging since you don't have a valid track record. Therefore, it won't be easy to pitch deals to private investors regardless of how lucrative the deal may seem.

    If you are serious about this endeavor, you must become a pro in deal analysis and underwriting. Practice analyzing deals daily while simultaneously building your network of buyers/partners. 

    You're young, so I recommend slowing down before you acquire much debt. You still have time; this isn't a get-rich-quick business. 

    Good luck! 

    Thank you and I understand it won’t be easy to achieve this my life has never been easy so I’m used to pain and I feel more comfortable there. I’ve been working on my business plan 14 hours a day because I need to invest in my first property before January 1st 2025. Im confident that I will finish my business plan within 3 weeks I will than hire someone smarter than me that is good with business plan writing using fiver to enhance it. I will find an angel investor on or before October and will invest in my first property before the new year. This plan is mathematically possible which is why I know I will find an investor fast. 

    Also I understand that this is not a get rich quick scheme I knew someone would say that on my journey to success but for me this is not about the money, wouldn’t you feel proud of yourself if you achieved so much so young and retired your mom watching her smile after all the trauma and hardships? It’s worth the journey. I don’t have a lot of time I have 1796 days to become a millionaire it’s possible trust me.

    I’m gonna ask you some questions that will help me succeed even more, What were some of the biggest mistakes you’ve seen people make within real estate and how did it impact their real estate business? What else should I learn and improve on that’s crucial? What are some of the most important things that people tend to overlook?

    My investment team will include the following individuals: Investors, Lenders, Brokers, Tax attorneys, Accountants, Realtors, Business consultants, business mentors, appraisers, construction contractors, marketing team, and fiduciary financial advisors, who else should I be working with? 

    Thank you again for helping me I’ve learned quite a bit today.
  • Specialist · NJ · Member since 2022 · 1k+ posts · 652 votes
    2y

    What is your credit score and how much capital do you have to start with?  That determines how you start.  Cause if you do not have cash and credit that is your step 1.  Get your credit score up and get a hold of 50k.

    Then you need to set up in a market where 50k can play ball with some comfort, that's in the middle of the country and not the coast lines as much.

  • Rental Property Investor · North Palm Beach, FL · Member since 2018 · 2k+ posts · 1k+ votes
    2y

    @Joseph Fenner

    House hacking is one of the best ways of beginning your real estate investing journey (that is how I started years back in CT). Buy one multifamily property, live in it, self-manage it, learn the business, and then you will have a much clearer understanding of how the rental business works.

    First, you must review your market/neighborhoods where you want to invest, underwrite many deals, find a property where the numbers work, and purchase it. You will learn more about REI with that property than anything else you could do.

  • Member since 2023 · 63 posts · 43 votes
    2y

    How can I practice analyzing deals? Are there any programs that simulate the process?

  • Member since 2022 · 18 posts · 5 votes
    2y
    Quote from @Joseph Fenner:

    How can I practice analyzing deals? Are there any programs that simulate the process?


    Buy the BP Pro subscription.  I did the webinar "Real Estate Millionaire" and they gave a code for 20% off.  You can analyze unlimited deals and you really start to see the numbers and how they come together.  Good luck!  I'm new also!
  • Member since 2023 · 63 posts · 43 votes
    2y
    Quote from @Jimmy Bartlett:
    Quote from @Joseph Fenner:

    How can I practice analyzing deals? Are there any programs that simulate the process?


    Buy the BP Pro subscription.  I did the webinar "Real Estate Millionaire" and they gave a code for 20% off.  You can analyze unlimited deals and you really start to see the numbers and how they come together.  Good luck!  I'm new also!

    I just looked at it and I’m gonna buy it.

  • Member since 2022 · 18 posts · 5 votes
    2y
    Quote from @Joseph Fenner:
    Quote from @Jimmy Bartlett:
    Quote from @Joseph Fenner:

    How can I practice analyzing deals? Are there any programs that simulate the process?


    Buy the BP Pro subscription.  I did the webinar "Real Estate Millionaire" and they gave a code for 20% off.  You can analyze unlimited deals and you really start to see the numbers and how they come together.  Good luck!  I'm new also!

    I just looked at it and I’m gonna buy it.


    Awesome!  Where are you located?
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