Hello BP family! I am currently in the process of closing on my first primary residence which is a FHA 203k loan. I was in contract in early September, and hopefully will close by the end of this month and then still need to do the renovation portion of I­­t. With that said I’ve been studying the market that I work in which is a hour flight from home for me. I’ve reached out to an agent told her what I️m looking for: multifamily units on the riverfront, which she has been sending to me diligently. I am making I­­t a practice to analyze the deals that look good. I am almost finished with listening to all of the BP podcast as well as the Book on Rental Properties, and watched a couple of webinars. I am now making a list of property managers in the area as well as other folks I would need on my team. I’ve recently came across a 6 unit property on the river that was in my price range and I­­t had room to add value. I ran my numbers they seemed correct I’ll probably be posting I­­t here soon just to double check! I like I­­t I want to make an offer for owner financing the downpayment and the bank the rest of the financing. However, I️m in closing and all of my money is currently tied up in that house and waiting for closing to happens and the closing cost. What should I do?

If you're cash poor and have other arrangements then you should probably hold off. RE is a long term play

@Raina B.

So let me understand this, you are already going to buy your primary residence with an FHA 203K Loan. But you saw a nice 6 unit property that you would like to put a down payment on. Since you are already in closing with your main house, you are kind of stuck monetarily in putting any offers in the 6 unit.

My question to you now is....Do you want to have a primary residence or a 6 unit? And what kind of financing will you do with the 6 unit? If its an FHA loan then you can't have your primary residence because its also FHA.

At this point you will have to clarify your intentions with this 6 unit and what specific kind  of financing you trying to use to acquire it.  

@Brian Adzadi

The 6 unit would be for strictly rental income. Since my cash is tied up I was thinking about asking for owner financing for the downpayment and then the bank loaning me the rest. There are already tenants living there and paying rent. So there is an income to show off of I­­t.

@Raina B.

You have to remember, lenders do not count the tenants rent as income, because anything can happen where all of a sudden you no tenants paying you rent (a bad storm, a fire, sudden surge in violence, terrorist attack, etc.). They want to make sure that when push comes to shove you have your own income to cover that mortgage payment.

Since you are just closing on your primary residence now, it may not show on your credit history around the time you apply for lending on the 6 unit. So its sort of a long shot but try if you must.

I , however, don't think you may get the loan for the property because you are technically taking out 2 loans almost simultaneously. Not saying it hasn't been done but for you its even harder because you are cash strapped.

Also where are you going to get the money to cover the closing cost for 6 unit?

The answer is partners.

Before that though, something that has been passed over and shouldn't have been by all those commenting so far.  This is more important than all the rest, and will eliminate any discussion as to how/if to make the 6 unit work.

You're not going to get a loan from the bank for the 6 unit, if the DP is leveraged

@Brian Adzadi thank you I have been thinking a lot about just waiting until my primary closes first. Especially since I do need funding for my closing cost as well.

@Joe Villeneuve I’ve thought of doing a partnership however I dont have the time to offer in trade of the equity due to my job. As well as I know very few investors or even people who could invest. In regards to the dp being leveraged, does I­­t always have to be cash that you provide? How would this situation work with the brrrr method then. If you don’t mind explaining please.

Originally posted by @Raina B. :

Brian Adzadi thank you I have been thinking a lot about just waiting until my primary closes first. Especially since I do need funding for my closing cost as well.

Joe Villeneuve I’ve thought of doing a partnership however I dont have the time to offer in trade of the equity due to my job. As well as I know very few investors or even people who could invest. In regards to the dp being leveraged, does I­­t always have to be cash that you provide? How would this situation work with the brrrr method then. If you don’t mind explaining please.

 What time are you not offering now, that you can't offer to a partner?

Don't know any investor with money to invest as partners?...go find them.

DP must be a form of cash.  The lender with the biggest stake, the other 80%, will not give you any money unless they are in first position for lien rights.  If you already have a lien (a loan that is collateralized to the property) in the form of the DP, that is in first...and will remain first.  The bank will NOT take a 2nd position.

The Brrrr method has nothing to do with this.  In the Brrrr method, you pay cash for the property, then refinance your money back out (sometimes with more money than you put in).  The refi loan takes the place of all current loans, or replaces the cash put in with the loan, and returns the cash to the original investor.

B = Buy
R = Rehab
R = Rent
R = Refinance (this is where the funds used (cash) is returned to the original investor)
R = Repeat = This is where the original investor reuses the original cash again

@Joe Villeneuve

The time I was referring to is the boots on the ground literally the running round and making the connections, the sweat equity that I guess an investor would want on my part of the deal.

Now I understand about the Brrrr thank you for clarifying that as well as the cash downpayment part.

Thank you for your explanation.

Originally posted by @Raina B. :

Joe Villeneuve

The time I was referring to is the boots on the ground literally the running round and making the connections, the sweat equity that I guess an investor would want on my part of the deal.

Now I understand about the Brrrr thank you for clarifying that as well as the cash downpayment part.

Thank you for your explanation.

 As far as the question regarding, "I’ve thought of doing a partnership however I dont have the time to offer in trade of the equity due to my job. As well as I know very few investors or even people who could invest."...and you clarified the time in question as, "boots on the ground literally the running round and making the connections,...".  If you didn't have a partner, were you not going to have to do all of these things anyway?

@Joe Villeneuve
You are very right. I need to re-evaluate my expectations as an out of state investor. Have you invested out of state without a partner before, if so what steps did you have to take not only get the deal but to keep I­­t?