Trying to get started I have $15,000

[Tiffanie Mayo]

Ok Here is the Deal I just refinanced my Duplex( I house hack) I was able to get 15,000 out of my house. :) YES!!! Now I asked the mortgage broker to get pre- approved for a loan for me to buy another Duplex or a 4 family to house hack. She told me I wouldn't be able to do this with a FHA loan and it would be an investment property even if I moved in which means I would need to put 20% down. Should I just look for another broker or should I start looking for a private lender? Any advice would be great I really want to do this.... I want to buy another property this year. :)

[Scott Hollister]

Hello @Tiffanie Mayo, 

Congrats on house hacking and pulling some equity out to keep the investment train going! 

Goal: Buy another investment property. (Lets say you want to keep going, it sounds like you have the bug and won't stop after this next one.)

• So your goal should be able "keep" that 15k, that is to not have it sit dead or trapped as equity in a property netting you a $0 return. 
• That is great to hear you are pre-approved, have they factored in your new DTI ratio with this current property? (I stopped assuming this, Im sure you have asked these questions) If your tax return shows a loss it will hurt your chances of getting another loan.
• Always keep your options open about finding a broker, its good to have multiple exit strategies. Also its important to find one that understands real estate investing. (But if you find a great one, remain loyal) 
• FHA is a great product for just getting started. But instead of just using that money for a down payment, use it to purchase an investment property that needs work, force the equity so you can pull that 15k back out and repeat. This is the famed BRRRR strategy. However, most people underestimate the process. The hardest part IMO is the refinance, this is where the multiple exit strategies will come into play.
  • Lessons Learned: Find a bank that will cash out refinance AHEAD of time.
  • Ask if they have seasoning requirements. (Typically 1 year)
  • A new rule as of June 2017 is that the property has to be out of your LLC for 6 months to loan on. (This could change, as always find someone who is current with new regulations)
  • Find out the LTV they will loan on as a non owner occupied investment property.
• Those are some great questions for your lender to get you started. 

So the buy and rehab part. My advice is to find a private lender around 8% interest (or cheaper) only while you "season" the property. If not, which is normal if you don't have much experience you can partner with a HM lender. There are ARV products that will loan 85% of the purchase price, fund the entire rehab, up to 75% LTV of the ARV. So your 15K would go towards down payment, closing costs, points and fees, and holding costs until you fill the place. Then your tenants will cover that interest only payment. Then at the end you can hopefully pull all your money out and keep going. It is great process, and if nothing else hopefully this post will help you to think creatively. Best of success with your investing!