Where do I get funding???

Question

So here is my situation: I am looking to get some rental properties but have no clue where to start with funding. I have a good amount of cash set aside and have maybe 3-500 in debt. I also have 400k in equity in my current home.

My problem is that I have no idea where to go next. I have been looking at the MLS and HUD and have seen some interesting prospects, but have no funding. I emailed the lender I got my mortgage from but haven't heard back.

Any suggestions?

- Pete

Shaun Weekes · Answer

FHA and Fannie will allow you to use the rents as income if you're buying a home.  Two years experience is not needed for this two but it is required for any Freddie Mac loan.

So if you buy a 4 unit and the rents are 4K you can use 75% of that income or 3k

Say your total bills are 2k and you make 3k.  Your DTI would be 66% but now with the extra 3K from the purchase you now make 6K and you DTI 33%

So Mr. Holdman you are 100% correct if you're doing the loan through Freddie.  And in addition if you're going FHA or Fannie you can use the rents right away.

Pretty kool :)

Jon Holdman · Answer

You can get a conventional investor loan without having two years experience.  The two years experience is needed if you want to include the rental income when they compute your DTI to qualify for the loan.

Kevin Cardinale · Answer

"You can get a conventional investor loan without having two years  experience.  The two years experience is needed if you want to include  the rental income when they compute your DTI to qualify for the loan." Thank you for that Jon Holdman. I was thinking that was true, but wasn't sure.

Personally, I would buy some fixer up rental property, get a HML hard money loan, rehab it and rent it out for a 12 month total period, then get a conventional loan to pay off the HML.

My reasoning it that you'll get a better deal and much better ROI with depressed property than something that is already occupied and ready to go.

That might not be true 100% of the time, but I bet it is true 70% of the time. My experience so far has been that people are renting properties to people with everything in the properties still from the 1950s. I don't think you can get increasing premium rentatls from that.

Peter Stanford · Answer

@Lauren Lee Thanks! I haven't read that yet, seems like a logical place to begin though.

Lauren Lee · Answer

@Peter Stanford 
	I too am very new to this and looking for financing, have you read the ultimate beginners guide? it is available for free here on the website and on kindles. I have gotten a lot of great information out of it thus far. 
	Good luck with your investments.

Peter Stanford · Answer

I had heard about this method, but again, no clue where to begin. It seemed like a great idea in theory, and I understand the concept. My biggest set back is lack of knowledge and what the first step is.

Casey Carroll · Answer

Instead of buying rental properties on the MLS (which require mortgages and a high downpayment), perhaps I may suggest that you look into the "subject-to financing" niche, and acquire properties with built in financing. This offers a significantly higher cash on cash return (since you usually don't need much cash down on a sub-2 deal, if any).

Shaun Weekes · Answer

Everything that has been suggested is great but you don't need any rental experience per Fannie Mae to obtain a rental.  Freddie Mac requires 2 years of history however.

If it's an SFR that you're looking for then 20% across the board is standard and when you start looking at units ( max 4 for conventional financing ) the down payment will change depending on if you use fannie or freddie for your loan.

I hope this information helps and if you have any questions please ask and I'll do my best to help you out.

Peter Stanford · Answer

Thanks for the input. I have great credit and a steady income. I don't think I should have an issue getting the loan I just didn't know where to go to even begin applying. I really appreciate the guidance!

Brie Schmidt · Answer

I agree with Jon - I believe @Mike Hurney is involved with REIA events in the Boston area.

Where do I get funding???

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