How to Finance my First Deal

Question

So I'm a complete newbie and I've jumped head first into Bigger Pockets for the better part of the last two weeks.

My question is this..  I bought a house a year ago with my fiance.  So with already having a mortgage, how do I go about getting financing for an investment deal?

I do have about 15k I would like to invest in something but I don't think there's any way a bank would extend me another mortgage.

What "niche", if any could I get into so that I can get the ball rolling.

Thanks in advance everyone!

Ben Leybovich · Answer

Justin, here you go:

Find an asset which you can purchase at 70% of market value. Find a private investor to finance the thing to you. Once you own it, put the tenant in. In 9 months go to the bank and do a refi at 75% LTV (or whatever they do now days). Pay the private investor back and keep the house.

But be sure to work those numbers like crazy :)

Sam Grooms · Answer

Welcome to BP, @Justin Van Daele!

First, I would read Brandon Turner's book on creative financing. You can find it in the store section of BP.

For traditional financing, you'll need 20% down on an investment property. So, that means you can purchase up to $75K. I wouldn't go that high, so that you have some reserves. You'll probably do a slight renovation before renting it, too.

To give you an idea of the strategies you can find in the book I mentioned: Try to get control of a house, so you can fix it up and place a tenant in it. Once the bank sees you have a tenant with a lease, they'll likely be willing to lend to you on the house. Who knows, you may not even have to put anything down if you buy right and renovate right. To get control of the house, the two most common ways would be purchasing it with seller financing or a lease with option to purchase.

Good luck!

Sam Grooms · Answer

Yup, that's the one!

Stephen Kappre · Answer

I was speaking generally not specifically to a property. Of course one can purchase a place with tenants all lined up with leases in place. In those cases qualifying for financing would allow the use of those leases for income purposes. And yes with a vacant place no lease would be in place most likely, and so you couldn't use that income to qualify. I suppose if the place was a red hot commercial shop on a city corner you might have people lining up to rent through the renovations. Let us all have that problem! I apologize if my previous comment above was confusing.

Sam Grooms · Answer

No. In your lease with the current owner, you have a clause allowing you to sublease. You also have an option to purchase. Once you get renovate and get the tenant in, you exercise your option to purchase, and the bank finances the purchase. This is just one example, of probably 10+ the book has.

Jay Helms · Answer

@Justin Van Daele - most banks will lend up to 10 conventional loans per individual..as long as you have the down payment and DTI that meets their requirements. By that I mean you can purchase 1-4 unit properties using conventional loans. My advice is to talk with multiple banks and see what products they have that can meet your needs. Get that ball rolling!

Justin Van Daele · Answer

@Sam Grooms  This is the book correct?

Justin Van Daele · Answer

@David Weintraub  I do not.. I am in the very early education of everything.

Sam Grooms · Answer

I don't believe there are current tenants. If you're talking about potential future tenants, it could be hard to get the property renovated going that route. They'll have to be willing to not only wait the 30 days to close, but wait until you can get in there and fix it up after closing. They'll also have to be willing to sign the lease in the current condition, trusting they'll like your future improvements.

David Weintraub · Answer

@Justin Van Daele do you have an idea of the type of deal you'd like to do?

How to Finance my First Deal

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