Buy and hold Loan first time home buyer

Starting Out
6yFollow

Buy and hold Loan first time home buyer

Brandon Kalker
Member since 2020 · 13 posts · 3 votes

Good afternoon,

I have 15k cash and I'm looking at purchasing a property between 100-200k. I'd like to rent that property out asap as I am already in a comfortable living situation. 

My question is what types of loans are their if their are any that would only take 5% or so down and not have me live in the house for a year before renting? 

and is their any way around that?

Thanks,

B

0Reply
25 views

Most Popular Reply

Paul Welden
Real Estate Agent · Tempe, AZ · Member since 2011 · 1k+ posts · 543 votes
6y

There are other types of rehab loans other than the FHA 203k and some even let you be an investor.

Fannie Mae Homestyle
Freddie Mac ChoiceRenovation
VA Renovation Loan

You probably want to consider the Homestyle for non-occupant borrowers regarding a rehab loan. 

2Reply
See this reply in the discussion

20 Replies

Jump to latestLatest
  • Collin Placke
    Rental Property Investor · Denver, CO · Member since 2018 · 46 posts · 48 votes
    6y

    What state are you in? Maybe @Andrew Postell can help? He was a great resource for me. 

    0Reply
  • Jaysen Medhurst
    Rental Property Investor · Greenwich, CT · Member since 2015 · 4k+ posts · 2k+ votes
    6y

    None, @Brandon Kalker, there are none. You typically need 20-25% down, plus closing costs, plus reserves. 

    Maybe you could negotiate a seller-financed deal, but that would be a real unicorn with only 5% down. HML might have been an option on the right opportunity a few months ago, but those loans are pretty much frozen right now, unless you have experience and an existing relationship with the lender.

    0Reply
  • Andrew PostellPro Member
    Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
    6y

    @Brandon Kalker the answer to your question is the BRRRR method. We use that method to limit our out of pocket costs BECAUSE buying a property the regular way requires so much out of pocket. You can use a conventional loan with 15% down, but buying a $200k property with 15% down is STILL $30k out of pocket + closing costs. I can use the BRRRR method and buy several properties with that much money. It's a harder method because you need to know how to calculate ARV and rehab costs, etc. but it pays off in the long run. I hope all is makes sense.

    @Collin Placke thanks for the mention!

    0Reply
  • Brandon Kalker
    OP
    Member since 2020 · 13 posts · 3 votes
    6y

    @Jaysen Medhurst I don't mind waiting until these loans become available again. Maybe I was thinking to high of cost because I know FHA loans can help you with low money down.

    I live in richmond and I'll he honest irs hard to find a good house in a neighborhood that's ready to go with rehabbing under 100k

    0Reply
  • Brandon Kalker
    OP
    Member since 2020 · 13 posts · 3 votes
    6y

    @Andrew Postell thanks for the advice I'm aware of the Brrrrr method but my question is just starting out how are you able to secure a loan with the funds to rehab at such low cash down?

    And what would you think of buying my first property out of state? I'm in RVA and all the properties that yield good cash flow around

    here are pricey.

    0Reply
  • Andrew PostellPro Member
    Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
    6y

    @Brandon Kalker we don't use traditional loans with BRRRR properties. We use an "acquisition" style loan (for the BUY and REHAB steps of BRRRR). Hard Money is an example of this type of a loan. One that will lend based on the ARV. So let's say that you can qualify for a 75% ARV "BUY & REHAB" loan. You just target properties that you can BUY and REHAB at 75% and your out of pocket will be $0. I hope that makes sense how I am describing it.

    0Reply
  • Brandon Kalker
    OP
    Member since 2020 · 13 posts · 3 votes
    6y

    @Andrew Postell I do understand but it brings up more questions haha. I was under the impression hard money lenders require "points". Also after you buy & rehab with the hard money how would you rent it out still owing the hard money lenders monthly pavements with extreme interest rates without going negative? 

    0Reply
  • Andrew PostellPro Member
    Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
    6y

    @Brandon Kalker that's what the REFINANCE step is for.  You BUY using their money, then REFINANCE after all the REHAB is done.

    1Reply
  • Brandon Kalker
    OP
    Member since 2020 · 13 posts · 3 votes
    6y

    @Andrew Postell That is the key! I figured that out lol I wasn't sure how refinancing worked before but now I have a clear understanding of how to obtian "seed money" which brings up a couple other questions.. 

    I know hard money lenders can be very risky.. especially with someone that does not have any experience in rehabbing at all like me. I looked into the 203k loan as well which is safer but I'm not planning on owner occupying.. also after rehabbing I read some banks won't let you refinance right away? 

    Can you suggest a way a newbie like me could start his first Brrrr without being at extreme risk? 

    0Reply
  • Matthew PorcaroBusiness Member
    Lender · Long Island, NY · Member since 2016 · 456 posts · 336 votes
    6y
    Originally posted by @Brandon Kalker:

    Good afternoon,

    I have 15k cash and I'm looking at purchasing a property between 100-200k. I'd like to rent that property out asap as I am already in a comfortable living situation. 

    My question is what types of loans are their if their are any that would only take 5% or so down and not have me live in the house for a year before renting? 

    and is their any way around that?

    Thanks,

    B

    Hey Brandon - when I got started, my first deal was a beat up duplex that I purchased with an FHA 203k renovation loan. The 203k loan allows owner occupants to purchase a distressed property, and you can wrap your renovation costs into the mortgage. If you aim to keep your purchase price + renovation cost below 80% of the after rehabbed value, its an excellent way to gain equity.

    Since my property was also a duplex, I was able to live close to mortgage free since my tenant paid 90% of the mortgage and taxes each month. After I eventually moved out and in with my wife, I now rent out both of those units for about $2k a month cash flow. 

    The best part of the process was I was able to use the equity I built during the rehab ($150k) to finance more flips that I currently do now. I tapped into this equity using a home equity line of credit.

    Best of luck!

    MP

    The 203k Way
    WebsiteView Page
    1Reply
  • Andrew PostellPro Member
    Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
    6y

    @Brandon Kalker I don't know if I would use the word "risk" with a hard money lender. I mean, it's all risky in some aspect but most of the risk falls on us an investors. We need to know how to calculate ARV and Repair Costs BEFORE we close on the property. And I would even suggest knowing those BEFORE you even make your offer. So to learn those things its probably hard without another investor actually teaching you. So network with other LOCAL investors and see if you can lean on them for advise on who to use. Maybe post in the Bigger Pockets state forum you are investing in. There's usually some good investors that monitor that forum. Thanks!

    1Reply
  • Paul Welden
    Real Estate Agent · Tempe, AZ · Member since 2011 · 1k+ posts · 543 votes
    6y

    There are other types of rehab loans other than the FHA 203k and some even let you be an investor.

    Fannie Mae Homestyle
    Freddie Mac ChoiceRenovation
    VA Renovation Loan

    You probably want to consider the Homestyle for non-occupant borrowers regarding a rehab loan. 

    2Reply
  • Brandon Kalker
    OP
    Member since 2020 · 13 posts · 3 votes
    6y

    @Andrew Postell Thank you for the great advice! I've went ahead and contacted a local REI investor and I'll be attending some meet ups once this pandemic blows over.

    @Matthew Porcaro Yes I would use the 203k if I was planning on owner occupying. As my description to this forum implied I am looking for something alternative to owner occupying rehab loans. Thanks.

    @Paul Welden Thanks for that list I'll look into each of them. Is it safe to assume each one of those loans have close to a 20% down payment? 

    1Reply
  • Matthew PorcaroBusiness Member
    Lender · Long Island, NY · Member since 2016 · 456 posts · 336 votes
    6y
    Originally posted by @Brandon Kalker:

    @Andrew Postell Thank you for the great advice! I've went ahead and contacted a local REI investor and I'll be attending some meet ups once this pandemic blows over.

    @Matthew Porcaro Yes I would use the 203k if I was planning on owner occupying. As my description to this forum implied I am looking for something alternative to owner occupying rehab loans. Thanks.

    @Paul Welden Thanks for that list I'll look into each of them. Is it safe to assume each one of those loans have close to a 20% down payment? 

    The HomeStyle renovation loan will allow you to buy a non-owner occupied/investment property for only 15% down. You will still be on the hook for the PMI (mortgage insurance) each month until you hit 20% equity (which is usually immediately after the rehab!)

    The 203k Way
    WebsiteView Page
    0Reply
  • Brandon Kalker
    OP
    Member since 2020 · 13 posts · 3 votes
    6y

    @Matthew Porcaro Thanks for that! I'm looking into the Fannie mae. It seems a lot of investors has had success with it. I've brought my purchase price down to under 100k so I believe that could be doable. 

    0Reply
  • Matthew PorcaroBusiness Member
    Lender · Long Island, NY · Member since 2016 · 456 posts · 336 votes
    6y

    @Brandon Kalker

    Yeah it’s definitely become a favorite in the renovation lending industry! If you have any questions feel free to reach out.

    The 203k Way
    WebsiteView Page
    0Reply
  • Xavier Williams
    Real Estate Agent · Berkeley, CA · Member since 2016 · 67 posts · 6 votes
    6y

    Yes, homestyle loan would work great for this scenario. I have this loan product available still, but I'm in California. I'm assuming you're in Richmond,VA and not Richmond, Ca?

    0Reply
  • Brandon Kalker
    OP
    Member since 2020 · 13 posts · 3 votes
    6y

    @Xavier Williams Yes I am located in Richmond VA

    If you know of anyone in this area that you can reference that would be greatly appreciated. 

    0Reply
  • Xavier Williams
    Real Estate Agent · Berkeley, CA · Member since 2016 · 67 posts · 6 votes
    6y

    Will see if I know anyone!

    0Reply
  • Jason Schilling
    Richmond, VA · Member since 2015 · 2 posts · 1 vote
    6y

    @Brandon Kalker Hey Brandon, I am in Richmond as well. What area of town are you investing in? I am a relatively new investor as well and have 2 properties. I've worked with Kristine Arbogast (Towne Bank) and she has been great!

    It looks like Towne Bank offers HomeStyle loans: https://townebankmortgage.com/pages/renovation

    Here is Kristine's page: https://kristinearbogast.townefirstmortgage.com/

    Hope this information helps!

    Jason

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free