Financing for low-income properties

4 Replies

Hi everyone. About six months ago i purchased my first property: a single family, about $45K that i bought with cash and is cash flowing at about $400 a month. 

I am now looking to buy a second (and possibly third) property, but have since realized that in order to make the property cash flow better, it would be better to get a loan on the property. I have two deals, both in the $120K range, that I think can cash flow nicely, but I am not sure how to finance them. My agent told me that since it is an investment property in a low-income area, it will be hard to get a loan from a bank.

I have about $50K that I am looking to invest in one or both of these properties, and was hoping to find some suggestions on how to finance them. I'll add that I have a great credit score, but no W2 job, as I work (and reside for the most part) overseas.

Thanks.

I think it will be hard without a W2 job. I'm going to follow the thread just to see what others have to say on this. I pay cash for all of my properties, and would consider taking a small loan to grow a little bit faster now that I have multiple going.

@Douglas Gross ......”My agent told me that since it is an investment property in a low-income area, it will be hard to get a loan from a bank”. Why would the low income area be hard for lenders to lend you money?

I assume that if you’re interested in a property that you’ll do your diligence to ensure that the property will cash flow. I don’t what that realtor meant by that comment or perhaps maybe that is not what you meant to convey, but if a lender is not going to lend in an area because that area is considered low income, then those lenders could be fine mightily for what may appear to be redlining.

In any case if you have $50k, that is enough to put 20% down on of those properties. You said you work overseas. If you’re earning income then I imagine you are filing your taxes here in the US that is if you are a citizen or resident living abroad. Foreign earned income exclusion of income taxes is currently at $102,100. You don’t need to be W2 to get a loan. If you have sufficient foreign earned income, then you may be able buy one of these invest properties.

@Douglas Gross

@Paul Defngin is right. It would be illegal for lenders to deny you a loan because you are investing in a low-income area.

I initially thought it would be hard for you to get a loan because you did not have a W2 income but you have earned income from abroad. That is better than having self-employed income, because most lenders will require you to present 2 years of taxes.

I think you are good. Just do some shopping around for lenders and see which one is willing to work with you.

@Douglas Gross
I think at best your agent doesn’t know what he’s talking about, and at worst they did something illegal by steering you away from a low income area.

I hate to say it but most agents won’t give you great advice on things like loans for investment properties. Talk to an investor friendly lender about that.

The only thing I can think of is some lenders don’t like to lend below $50k. But that’s not to say you can’t find one that would.

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