What’s my next step?

Question

Good morning guys! I have a few questions about my next step(s) so I’m hoping I can get a little advice. I’m from Chicago and will be investing in the Chicago market. I am only interested in multi-family. I have an investor who’s willing to invest towards my first deal (down payment). What should my next step be? I have decent credit but have a couple of maxed out cards and a new personal installment loan (3 months new). Should I pay them down first before applying for a mortgage loan? There are lots of potential investment properties here in Chicago currently. Should I just dive in? I don’t have much education other than podcasts and a couple of books. What should I offer as a payback strategy to my investor? What type of mortgage loans should I look into? And just a side note, I’m unable to do house hacking. Please help. I’m ready but don’t want to go into this blind.

Aletha Brown · Answer

@Michael Facchini Thanks a bunch Mike. That information helped because I was curious if I did occupy could the 3.5% be gifted. I have worked out a way to where I can occupy. I’d just be investing in a different city/town. Again, thanks a lot. And I’ll hold you to it!

Michael Facchini · Answer

@Aletha Brown and @Brie Schmidt, there is the option to do 15% down on non-owner occupied, investor 2-4's, but as Brie mentioned those funds need to come from the buyer/borrower.  If you're teaming up with a partner and they are providing the down payment, they would need to be on the loan with you.  Or if you're looking to occupy one of the units, you can look at as little as 3.5% down and that can be "gifted" from your partner (without them on the loan).  But sounds like you're unable to occupy?  As for paying off certain debts, you'd definitely want to talk with a lender first to see where your dollars are best allocated.  I hope that helps!  Reach out anytime if I can be of assistance!

Aletha Brown · Answer

@Crystal Smith

Thank you for the advice. Very appreciative.

Crystal Smith · Answer

Reading between the lines you're going to be a "nervous investor"  Cash poor, great credit, but credit cards maxed out,....  which means even if you have an investor that will provide you with the downpayment & you closed on a property; you'll have no reserves or credit to handle a vacancy or a minor/major repair.  The first emergency will stress you out (nervous investor).

What to do next- Study and determine what kind of cash reserves you'll need to handle vacanies, repairs,.....

Regarding a mortgage loan- Study and understand the implications of borrowing a downpayment if you go the traditional route for a loan (Fannie or Freddie).

Bottom line- Don't dive in. You have some more research to do beyond the podcasts & a couple of books.

Joe Villeneuve · Answer

NO, what I'm saying is you seem to be making a series of conflicting statements in your original post.

Aletha Brown · Answer

@Joseph Konney Thank you Joseph for your advice. I will definitely take what was said into consideration.

Aletha Brown · Answer

@Brie Schmidt Thank you for your helpful advice. Definitely leading me where I need to go. Thanks!

Aletha Brown · Answer

@Joe Villeneuve

Nicely saying, if you’re not here to help, refrain from leaving unnecessary comments.

Joseph Konney · Answer

I recommend talking to a mortgage broker about lending options and seeing what you can get pre-approved for. Based on that, what properties can you qualify for, run numbers, and project methods of repayment or profit sharing on that.

If an investor is giving you a loan for a down payment, that will count against your debt to income ratio. If you don't want it to count as a loan, you would both need to be on the title to the property and your investor would need to apply for the loan with you.

Brie Schmidt · Answer

@Aletha Brown - If you do not plan on living in the property you will need 25% down, I suggest talking to a lender now and seeing where you are at financially and what you need to do to get to where you want to be.  They can advise you on what needs to be paid down first.

You can also ask them about your down payment, a large portion of that has to be your own funds, so you have to have your own money.  If you are thinking of using private money for the down payment they can help explain the guidelines and limitations.  You also need to figure out why an investor will give you money, what can you do for them that they can't do themselves?