This one of my first posts on bigger pockets so bear with me if I am a little off on something. I have been studying for a while now about buy and hold investing and figured if I keep reading about it I am never going to start. So my first step is figuring out what type of financing would be my best bet/ if I am even financially ready. I'm 23 years old with a 750 credit score and about 10k to invest. Would it be prudent to go out and start talking to banks? If so, is their anything I should know before hand?
Yes. You should know that down payments for investment properties are going to be 20% or more. Maybe 15%, according to some recent posts. Unless you're buying very cheap properties, you may need to accumulate more cash to go the bank loan route. And if you are buying very cheap properties you may fall below the bank's minimum loan size.
As far as qualification, banks will initially ignore the rental income. So you'll need to be able to qualify for the full loan payment with your existing income. Once you have two tax returns showing the rentals you'll be able to use that income, which should help the qualification process a lot.
Jon Holdman, Flying Phoenix LLC
Awesome Jon thank you
I'm looking to purchase a property around the 65k range. Would that fall below a banks minimum loan size, or does that depend on the bank? Also a few more thousand down should not be an issue as I have a few toys I had planned on selling anyway
Another thing I would suggest, Ryan, is joining a REIA in your area. There, with what you've accomplished so far (credit rating and cash) you will probably find people to network with; partners to invest with or even contacts for bankers who may not ask for 20% down on your first investment.
With what you're bringing to the table, you may find many, many avenues to get started with!
$65k should be enough to be above the min loan requirement at most banks. The minimum financed at my bank and my credit union is $50k.
Don't forget to account for closing costs, pre-funded escrow, and reserves. You will need to come to the table with more than just the down payment.
An excellent idea. Only their is something that comes to mind. The area I live in is not the area I plan on investing in, would that matter if I joined a local REIA?
Ryan the best way of knowing what banks are offering in your area is to start a dialog with as many that are willing to talk to you. Bank approval is not just credit and down payment. They will look at your amount of debt you are carrying and your income history. The residential loan market has lower rates. A commercial loan is looking closer at the deal and the cash flow and income are the key issues.
Thank you Michael
That's my goal. This week I'm going to start talking with banks just too see what they have to say, and also to get experience talking with them.
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