I am a homeowner looking to supplement my income by purchasing a second home, preferably a duplex, and renting it out. The only problem is I only have $15K saved. I am looking to purchase properties in the 50 to $60K range. So I have the down payment saved but nothing for closing costs or a contingency/reserve. I feel I would need closer to $30K saved to be able to start looking at buying. I can only save about $10K a year at my present job, and there's little I can do to supplement my income short of taking on a second menial job. I don't want to have to wait another two years to buy a rental. Are any of the following viable options ? :
1) Take out a personal loan to serve as a contingency, and if I'm denied a mortagage due to debt/income ratio, pay the loan off immediately.
2) Take out a 7 year personal loan for $25K, combine with my savings, and purchase a $40K property in a bad neighborhood that needs work.
3) Save for another 6 months, neogiate the seller pay closing costs, and hope $20K in savings leaves enough contingency to satisfy a lender.
4) Find a lender that only cares about income and down payment, and not any contingency/reserve??? Is this possible?
I know it sounds like I'm cutting it too close and going broke by buying a property, but I have a stable enough job, and extensive lines of credit to use for major emergencies, if it came to that.
3) Try to get
How about renting out your primary residence and buying a new primary residence? That could be up to a 4plex for 3.5% down with an FHA loan.
You're going to have a challenge finding a lender for these low priced properties. Many lenders don't want to deal with small loans like this because there's little profit in them. I would start calling small banks and credit unions in your area and finding out their requirements and lending guidelines.
Lenders usually don't have very large requirements for reserves for small properties. They will want something like six months PITI on the new property. Maybe two months PITI on your current residence.
How about increasing your active income by acquiring new skills that have a higher value in the marketplace?
If you are a homeowner now, I would think you can use a home equity line of credit for the second house, keeping your hard cash with you. No money down on the next house.
Here's your opportunity to get out and hustle. You can search to find an owner that will carry the papers. Read up on owner finance. You can get in with little down, keep what you have as reserves. Be sure to run the numbers so you have the positive cash flow and your set.
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