I've been trying to find a good deal in my area for buy and hold, but it seems a impossible task. The SFH have too much property tax and the price doesnt match the income. So I have been looking into buying a 5+ Multi Family so I can get out of the home owners area and do business based on income.
I have enough money to put skin on the game, but I can't buy it all cash. My question is, can I finance it as my first rental? What types of bank should I look for?
Yes you can finance as your first rental. Talk with local community banks that do business loans on multi family. Your credit, down payment amount, and the details if the financed property will all be factored into what rate and terms you can get.
There is also seller financing, joint ventures, subject to, etc as alternatives.
In 2002 I was 19 years old and wanted to purchase my first rental property. I chose 15 N. Hamilton, Ypsilanti which is directly across the street from the Eastern Michigan University Business School. The property was a 5 unit so I could not get a residential loan and instead got a commercial loan from a local bank. I put down (approximately) $50,000 in cash and borrowed $209,000 at 5 percent, 5 year term, 20 year amortization. I still own the property today and have been very satisfied with the investment. I would strongly suggest you find a local banker that is interested in your story and your deal.
You'll have to use commercial financing because anything over 4 units is not considered residential, it's commercial. That could hamper returns, although I'd be surprised if you could find a 5-unit that does much better than the smaller buildings. The problem isn't the type of property you are looking for, it's where you are. NJ typically doesn't provide positive cash flow on rentals unless you were to find a sneaky killer deal and likely have to put a lot of work into it.
On the 4 and less the return is usually crappy too. Property tax is the culprit, most of the time.
Being a beginnerish is specially hard to find anything good. I've been trying to buy my first rental for almost a year. I have all the stuff ready to go, cash for 25% down, financing, good credit, just no deal.
That is why I am looking into 5+, so I can get a valuation based on income and cap rate instead of being on the business of comps and fighting homeowners.
The area still loaded with foreclosures, REO's, short sales. Very different than the rest of the country.
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