financing my first property

4 Replies

Disclaimer: I am very new to real estate investing and this is my first post on biggerpockets.

I am looking into purchasing my first property. I have been reading/researching for a while and feel ready to make the move. However, I have a few questions concerning financing (this seems to be a general theme among investors ha). Any information will be greatly appreciated. 

First, let me give some background information:

1. I am looking for rental buy and hold property.

2. My wife and I already have a house and are not looking to house hack.

3. We have day jobs and are "bankable".

My goal is to get my first property with as little down as possible. Since we will not be living in it VA loans etc do not help.

I contacted my current mortgage lender and asked them about financing options for rental property. I was told they have some in house loans for 15% down or traditional for 25% down. The in house is a good loan but 15% is more than I would like to put down.

The lender told my I could get a line of credit on my current house and use this as the down payment for the rental home. I assume she was talking about a HELOC or HELOAN. Has anyone done this to finance rental property before? If so can you please give me some Pros and Cons?

Also do you have any other options for low to no money down financing?

Thanks in advance for any advice

@Jacob Daniels if you have equity in your primary house this is a good way to finance your down payment as long as the Home Equity line of credit fits into the lenders debt to income ratio.  15 to 20% will be standard for an investment property purchase.

15% is generally the minimum down payment for an investment property. When considering a HELOC, remember to include that payment when figuring cash flow. You're basically carrying two loans on the property until the HELOC is paid off. Another low money down strategy is the BRRRR, or buying a fixer rental with short term loans, them refinancing into something longer term and getting your down payment back. Now you'll still need up-front cash, but only temporarily.

@Jacob Daniels I have used my homes equity to fund (HELOC) all the down payments for my properties. It is a great way to get started without using any of your own finances. A couple things to be aware of though. If you use a HELOC to fund the down payment you are in essence 100% leveraged on the property. That means that you need/should be able to cash flow after all payments. Also you will likely need to use commercial lending which looks at the overall value/profitability of the investment property.

As for down payments 20-25% is common, sometimes even higher. 

@Jacob Daniels , I've used a HELOC. I saved up for the down payment on the first SFR and half of the second SFR. I used the HELOC to pay the other half of the down payment on the second SFR and the full down payment on the third SFR and will use it again to pay the full down payment on the fourth SFR. Then it will be tapped out and I'm back to saving for the down payments again.

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