Property Manager · Troy, NY · Member since 2017 · 204 posts · 81 votes
I should start by saying I just joined the forum and posted two situations that make us unlikely candidates to qualify for a mortgage (I think). We are very green. We do have EXCELLENT credit and have a mortgage on a personal home, but have wacky personal financing for two other potential properties.
In case we ever could qualify for a traditional loan, I’m wondering how many of you recommend it. I think we understand the benefits of good debt, and we also have hopes to pull our money out of properties once they are up and running smoothly (fingers crossed).Our first two deals are in the works, but we are trying to avoid rookie financing mistakes. We have a great account and we read a ton and listen to the podcasts, but it seems everyone has a bit of a different strategy with this.
Investor · Monroe, WI · Member since 2015 · 691 posts · 610 votes
9y
Many of us here use mortgages (good debt) to build our wealth faster and highly recommend it. Why would you not want to take advantage of the cheapest money available?
As an investor, it's one of the smartest things you can do. As long as your not leveraging yourself too high and buy the right properties and by that, I mean run all of your numbers and be somewhat conservative.
Investor · Monroe, WI · Member since 2015 · 691 posts · 610 votes
9y
Many of us here use mortgages (good debt) to build our wealth faster and highly recommend it. Why would you not want to take advantage of the cheapest money available?
As an investor, it's one of the smartest things you can do. As long as your not leveraging yourself too high and buy the right properties and by that, I mean run all of your numbers and be somewhat conservative.
CPA · Rochester, MN · Member since 2016 · 48 posts · 51 votes
9y
For many beginner real estate investors, they will hit a wall with the banks at some point and will be forced to tap into other financing options. My opinion is that you should utilize as much of the banks money as possible and as soon as possible (that's just a general statement that may not be the best approach depending on a person's situation).
The banks will make sure your debt-to-income isn't too high for them and will have a bunch of other checks and balances. As long as it's a good deal, get the property and try to use the banks money if possible. Then you'll free up your private financing options for the next deals in the future.
Jered Sturm, on BP, said that he hasn't used private financing for any investment deal that he didn't first use his own cash and bank financing for. He said it gave him credibility when he tapped into private financing. I'm not saying that's the only solution, but there may be good reasons for using that approach when possible.
Residential Real Estate Agent · Grand Rapids, MI · Member since 2013 · 803 posts · 689 votes
9y
I have never had good luck finding private money (at a fair price) or owner financing. Traditional mortgages are how I grow my portfolio currently. I feel as if you have to overpay for a property to get the chance to seller finance. I am concerned about equity more than just getting a property because I can afford the payment. I need an exit strategy for each one and seller financing isn't always easy to exit from.
If that is your only option then it is what it is. If you can get financed through a bank then I would always suggest that option first.
Property Manager · Troy, NY · Member since 2017 · 204 posts · 81 votes
9y
This is so helpful. Our original plan was to use traditional mortgages and our new accountant advised against it when possible. His thinking is that we will end up ahead when we are paying less in interest. While this is probably true, we are really new and I don't think we will get particularly far without using the bank.
Thank you!
Investor · Monroe, WI · Member since 2015 · 691 posts · 610 votes
9y
@Jamie Brayton I would find a new accountant ASAP. His thinking is not an investor-wise thought. My rentals with leverage return me 15-20% COC average, and my interest rates are 4.5-5.25 on my mortgages, now why would I want to pay cash when I can borrow at such a low interest rate, locked in for 30 years and make 4-5x more than the interest rate paid to the bank. Find a RE savvy CPA.
Property Manager · Troy, NY · Member since 2017 · 204 posts · 81 votes
9y
@Samantha Klein This is great advice. He came highly recommended, but by people earning traditional salaries that own additional personal properties. Various feedback I'm getting this morning makes me think we need to prioritize finding the right team to work with. Any tips on how to do that? It looks like the REIA group in my area is no longer active and google isn't yielding much. I did sign up for a few local meetups, but they look like they are trying to sell some sort of service. Perhaps they are worthwhile just for the networking opportunities?