I am interested in purchasing my first rental property which is a duplex. I believe I have a decent chance of obtaining a loan however I would like a better idea as to whether it is possible and what to expect.
The asking price is 70K.
Both sides currently rented at 537/mnth. Mkt rent is 630.
I would like to buy at hopefully no more than 60K.
I do not want to put anything down (not sure if this really is possible but I hope so). If I need to put anything down, I could do $2000 cash. Or takw out another loan for thw down ppayment.
I have a 754 credit scrore.
I have 1200 in debt but I do not have mortgage or rent to pay.
Gross monthly income around 2.5K.
I own a condo free & clear which currently values around 28K.
Before I apply for any financing, I would like info on:
Does anyone have an idea on if I may obtain financing based on these factors?
What is the benefit of telling financial institutions I want to purchase an investment property vs a primary residence. With a duplex, could I even convince them that I will reside on 1 side & rent the other? Even if I really don't plan to. If I don't, I'm pretty sure financing is a lot more expensive for an investment property.
Is it common for duplexes to have HOA fees?
Is there any way I can determine term options on a loan before being pre-approved? Meaning, if I only want a loan for 60K, what are the chances of me being able to get a 30 yr. Term?
All responses are welcome. Thanks in advance.
Hi Jasmine and congratulations on getting started.
First, I am not aware of any lenders who will finance 100% of an investment property. Most require a minimum of 20% down however there may be some out there who will accept less.
If you're even thinking about telling the bank that you'll be living in one side of the duplex and you really don't plan to, my advice would be DON'T! You're committing fraud if you do and if they find out they could call the loan due. What would you do if that happened?
Since this is your first investment property the banks will not allow you to use any rents from the property as income. That means you will have to qualify for the loan with your income, assets and liabilities. You typically have to show that you have been a landlord for at least 2 years before banks will start allowing you to use 75% of rents as income to help you qualify for another loan.
Financing is no more expensive than owner-occupied financing, you just have to put more money down.
It is not uncommon for duplexes to have HOA dues, it depends on the community, not the property.
You should not have a problem finding a lender who will give you a 30-year term on a $60k loan. Many lenders will not loan less than $50k but there are some out there who will. Even in that case you can still get a 30-year term.
Best of luck!
There is a lot more here you need to know, I would be happy to skype chasesydney with you and answer any question you have. In short I know it will be very hard for you to get a no money down loan. Also just by the short numbers you gave it also does not look like it will cash flow well.
Just had very high hopes, but I pretty much knew I would have to put $ down. I plan to use the equity in my condo as a down payment.
I do prefer to find a duplex w/o the HOA fees. Just hope it doesn't seem impossible.
Sydney - I do not have skype, sorry . However, can u please give me the info I am missing in evaluating the deal?
Thanks a lot guys!
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