No rental loans while leasing?

Question

Hi guys! Newbie here starting my real estate journey this year. I am an online fitness coach trying to invest some saved cash. My goal is to obtain 2 rental properties by the end of this year. The plan was to find something decent and house hack with 3-4 unit property, but its slim out there nothing decent enough I would want to live in myself. - so I figured I'd keep looking anyway for a non live in rental. Then the bank says because I currently rent myself, I can't obtain a rental loan without already owning a property. I didn't know this rule, is this true everywhere?

I plan on moving out of state (I live in upstate NY) within 2 years which is why I don't own currently. Do I wait and start when I move? Is it even worth it if I plan on moving far from my properties? Do I proceed to find something decent to house hack until I move? I also thought about getting land and a pre-fab building. Thoughts on all this?

Sorry pretty loaded question, appreciate any help in advance! Loving this forum already.

Dakota DeCuffa · Answer

Thank you!!

Jason Smith · Answer

All big banks will say no. Half of credit unions will say no. Just have to find the right credit union. Try provident.com also.

Dakota DeCuffa · Answer

Thank you Greg!! I was surprised too after reading many different real estate books and not seeing that rule once.

Dakota DeCuffa · Answer

Thank you so much!! Very very helpful. I was surprised as it was a credit union that said this is a national rule. I will consult again.

Thanks again!

Wale Lawal · Answer

@Dakota DeCuffa

This is not true. You can obtain a rental loan without already owning a property. If this is specific to your city (which I doubt) then look outside your city. I know many people that still rent and own rental properties with 80% financed by the bank.

I will suggest you look for investor-friendly banks. Don't go to the Big 4 banks. Use a local or regional bank. Going through a mortgage broker is the best as they will be able to shop several loan options for you and present you the pros and cons of all.

Yes, house hacking is great and I encourage this. You can house hack with only a 3.5% down-payment with both FHA and Conventional loans. I strongly recommend conventional because the PMI will fall-off once you achieve 20% equity in the house.

I will suggest you buy now IF the number make sense for you because interest rate is still very low then rent your unit out once you move.

Modular units are great, just make sure the numbers make sense for you.

Goodluck.

Greg Scott · Answer

That is garbage advice.  Ignore it.

Most loan people you find at banks understand only one flavor of mortgage - a mortgage for an owner-occupant.  I once had a Bank of America loan officer tell me it was illegal to own more than five homes!

Even if you talk to a smarter loan officer, it is better to find a mortgage broker that knows how to deal with rental real estate.  Those the cater to rental real estate also know that the income from the rental helps you qualify for the loan.  In other words, you may qualify to buy a bigger / better property than what you would get from a typical bank.