Feeling discouraged after this!!

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Feeling discouraged after this!!

Shawn Munoz
Vineland, NJ · Member since 2016 · 42 posts · 6 votes
Okay so I've found a few properties that I want to purchase to start renting them out. After months of looking at properties. I attempted putting in an offer on a property that costs 54K. I have 20% to put down. The real estate agent is telling me since The house cost is so low I have to purchase it full cash because nonbank will fund something so low. Is this legal?? I think it's crazy. I see stories on here everyday with people purchasing and never heard of this. The property is in Nj btw.
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Jerad Casto
Charleston, WV · Member since 2016 · 42 posts · 37 votes
9y
Visit the small local banks in your area. I just recently acquired a mortgage on a SFH for $38k from a local credit union. If you have the 20% and good credit, it can be done.
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  • Kevin L.
    Investor · Indianapolis, IN · Member since 2015 · 19 posts · 8 votes
    9y

    You should go talk to some banks and get pre-approved for a loan. There are definitely banks that will lend to you for something like this if your financial history is somewhat clean and the property isn't completely trashed. That way when you find a property like this, you can confidently put in an offer and don't have to worry about the financing. 

    1Reply
  • Elizabeth Wilson
    Real Estate Investor · Memphis, TN · Member since 2016 · 940 posts · 695 votes
    9y

    @Shawn Munoz - Sorry to say but your agent is right. :(  Banks won't/can't finance a non-owner occupied property in the 50k range.  We have a rental like that in Memphis and it sucks but now we know.  

    Maybe you could look for a duplex and you can house hack!

    Don't be discouraged!  Keep on hunting for a deal!

    Best of luck!

    2Reply
  • Shawn Munoz
    OP
    Vineland, NJ · Member since 2016 · 42 posts · 6 votes
    9y
    Elizabeth Wilson thanks for the advice. The thing is that I already own my home so I cant house house hack. I just wanted to start off small with some lower cost properties and work my way up. I guess I should try being pre approved and then look for properties
    1Reply
  • Shawn Munoz
    OP
    Vineland, NJ · Member since 2016 · 42 posts · 6 votes
    9y
    Kevin Labourdette the property is actually in good shape for having such a low price. Not in the best part of town but it isn't horrible. I guess I should try neon pre approved
    0Reply
  • Jeff Sprunger
    Lockport , NY · Member since 2014 · 265 posts · 124 votes
    9y
    how about HELOC on your personal residence? maybe a personal loan? my bank will loan $35k with a signature loan. Bring in a partner and pay all cash.
    0Reply
  • Brian Nordman
    Oregon, IL · Member since 2016 · 104 posts · 32 votes
    9y

    I'm with @Elizabeth Wilson I also wouldn't turn down the idea of house hacking so quickly. Use your funds to do a low down payment mortgage on a multi unit. Live in one rent out the rest and you could start renting out the home that you now have as your personal residence. Just gotta be creative!

    0Reply
  • Adam Giles
    Rental Property Investor · Flagstaff AZ · Member since 2016 · 64 posts · 49 votes
    9y
    Talk to portfolio lenders. I specialize I this price range and have notes on properties ranging from 25k to 79k. You absolutely can get financing on a property at that price. You will likely get 75% ltv (might have to do 70%) and they will go 5yrs with a balloon, amortized over 15yrs.
    2Reply
  • Robin Hines
    Investor · Orlando, FL · Member since 2016 · 44 posts · 85 votes
    9y
    I've gotten a few mortgages from Wells Fargo for some cheap properties (the lowest being 55k).
    0Reply
  • Craig CurelopBusiness Member
    Real Estate Agent · Post Falls, ID · Member since 2016 · 1k+ posts · 1k+ votes
    9y

    @Shawn Munoz - It is legal for banks to deny a loan for such a low amount. Usually they do this because it cost them the same to underwrite a loan for $50k as it does for them to underwrite a loan for $500k so it is just not worth their effort. 

    To simply give up because a couple banks would not give this to you does not make any sense. Talk to private lenders, call other banks, friends and family, etc. If none of these work, maybe you use your funds (presumably $10k) and get a 10% down payment for a $100k property? Or FHA your way to a $280k multifamily property. There many ways to finance - take a look at Brandon Turner's Book on Real Estate Investing with No (or Low) Money Down. There's a lot to learn in there.

    http://get.biggerpockets.com/nomoneydown/

    Hope this helps!

    Craig 

    [email protected]Podcast Guest on Show #350
    1Reply
  • Oleg Shalumov
    Rental Property Investor · Teaneck, NJ · Member since 2016 · 567 posts · 291 votes
    9y
    Another option is HML with a possibility of refinance later on. Also credit card often have those special promotion for 0% - maybe use one or two to one up with cash payment on the house.
    0Reply
  • Jerad Casto
    Charleston, WV · Member since 2016 · 42 posts · 37 votes
    9y
    Visit the small local banks in your area. I just recently acquired a mortgage on a SFH for $38k from a local credit union. If you have the 20% and good credit, it can be done.
    4Reply
  • Sandra Schwe
    Investor · Indian Trail, NC · Member since 2017 · 6 posts · 4 votes
    9y
    That is not true... we are currently getting a mortgage for approx $52k (Purchase price $64,900) Wells Fargo's closing costs were high so we went with a smaller local bank. We have excellent credit and this will be our 3rd purchase.
    0Reply
  • Ron Fletcher
    Leclaire, IA · Member since 2016 · 161 posts · 130 votes
    9y
    False! I have financed two separate transactions in the last three months. One was only 44k. Go to small banks
    0Reply
  • Barry H.
    Investor · Scottsdale, AZ · Member since 2017 · 237 posts · 78 votes
    9y

    I agree with Adam Giles. I am also a Hard Money Lender (HML) and am in the process of financing a $20K loan for a rehabber where the LTV is solid. My frustration with banks and all the time and energy they waste turned me into a HML. :-)

    0Reply
  • Jim BlackburnBusiness Member
    Lender · Florida Based (48 states Puerto Rico) · Member since 2017 · 321 posts · 121 votes
    9y
    True. Typically 80 k is lowest loan amount for investment or the loan ends up violating high cost loan test since the fees could be more than 3% of loan amount when dealing with small loan.
    954-993-1625
    Stairway Mortgage, a Division of NEXA Mortgage LLC597 Reviews
    WebsiteView Page
    0Reply
  • Willie Murray, III
    Real Estate Investor · Memphis, TN · Member since 2013 · 15 posts · 4 votes
    9y

    Either do more research and find a bank that will lend the 50K OR take out a "peer to peer" loan(beware of high interest rates though). ...you could also, take out the high interest "peer to peer" loan then once you have made the purchase you could take out a HELOC on it and pay the peer to peer off with the HELOC..... that would be genius.

    0Reply
  • Ryan Craig
    Realtor · Nashville, TN · Member since 2014 · 148 posts · 46 votes
    9y

    Not true, I have a lender in PA that will do loans all day on 50k properties. Go to a different bank or even a mortgage broker to shop it around and you'll find someone. 

    0Reply
  • Senthilvelrajan Kumaresan
    Collierville, TN · Member since 2017 · 24 posts · 17 votes
    9y

    @Shawn Munoz, Dont get discouraged Shawn, there are banks who will lend with out a minimum criteria. I have recenlty done a loan like this here in memphis. Connect with me I will message you the lender I used. 

    0Reply
  • Justin B.
    Investor · Gaithersburg, MD · Member since 2013 · 659 posts · 441 votes
    9y

    First, I'll say that anyone who says a bank won't finance a property of that size is incorrect or is just speaking too generally.  I've financed at least 7 properties of that size and as low as $20k.

    Second, it could be "harder" to find a bank the lower the loan you need depending on the area.  It probably depends on what the median home price is in the area.  Where I invest, the median home price is probably $50-$100k depending on how wide the net is cast.  So a $54k home with a ~$40k loan is easy to do (I'm referring to Mississippi and Memphis, TN btw).

    Third, Never base anything you do off what one person says.  The agent may be speaking generally or it could be because of the size he just wants a quick close without a bank being involved.  Until you've talked to 10 different banks and had every single one of them tell you they won't finance it because it's too low, keeping going to banks and asking.  I can all but guarantee you'll find one.  Focus on the smaller banks.  If you're at the regional or national level, yea, you will probably have problems.  Local and state banks are the way to go.

    If you're trying to buy a $54k home where the median home price is $400k, you will have some challenges, but if you are trying to do that, I think you're in the wrong place anyway.

    1Reply
  • Susan Maneck
    Investor · Jackson, MS · Member since 2014 · 1k+ posts · 769 votes
    9y

    It is harder to get a bank to finance an investment property in the 20-50K range. Local banks must give loans to owner-occupied properties of qualified buyers or they are guilty of redlining. Regional banks and credit unions aren't bound by this. What I usually do is pay cash for my properties, then refinance them with a first-place HELOC a year later. Most banks won't do HELOCs for investment properties but Wells Fargo does and they give nice teaser rates the first year. Also, it is much cheaper to close a HELOC than a conventional mortgage.

    0Reply
  • Austin Fruechting
    Investor · Kansas City, MO · Member since 2017 · 791 posts · 1k+ votes
    9y

    @Shawn Munoz - 

    I have a mortgage on a property that was just under $50k, so some banks will do it. It's with a portfolio lender.  They just won't go more than 15 years on it and charged an extra 0.25%.  

    0Reply
  • Elizabeth Wilson
    Real Estate Investor · Memphis, TN · Member since 2016 · 940 posts · 695 votes
    9y

    Many thanks BP folks for correcting me on this!  I should never assume that just because every bank we spoke with has said no that this would be true for everyone.  Good to know there are other options out there!  I might try those with our property!

    1Reply
  • Joddie Mcclain
    Real Estate Agent · Orange Park, FL · Member since 2017 · 62 posts · 16 votes
    9y

    USAA will usually fund 50,000 minimum conventional loan. 15% down for a single or townhouse. 

    0Reply
  • Austin Fruechting
    Investor · Kansas City, MO · Member since 2017 · 791 posts · 1k+ votes
    9y
    Is there any CapEx towards the end of its life? Offer 64k with a 10k credit at closing to replace a roof and HVAC if they're toward the end of their life. Your loan is now above $50k and you get to finance those huge expenses as opposed to coming out of pocket for them in a couple years.
    0Reply
  • Michael Noto
    Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
    9y

    Going to view properties without being pre-qualified is a waste of time for everyone involved if you plan on having a financing contingency. In the process of getting pre-qualified your lender should clearly tell you what their minimum loan amount is.

    0Reply
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