Financing without a Mortgage

[Daniel Maltsev]

Hello everyone,

Complete beginner here trying to figure out ways of financing a rental my family has been looking at. It's a 4/3 home that's currently on-market for 649k. The city is expanding and there is lots of land for sale around the area due to a newly built university (which in our opinion practically guarantees rent).

It costs 649k, for which we'd down pay 130k and take out a 15 yr ~6.25% fixed rate mortgage for the remaining 519k. We'd estimated rent to be around 4000/month – after mortgage payments and property taxes, we'd be left with only $700 per month of cash flow. Obviously, this isn't ideal, especially with the down payment being so large and the house needing renovation.

One of the biggest issues (apart from the price being higher than it should be) is the mortgage; I've listened to lots of BP videos and I've rarely hear anyone say they financed a property with a mortgage. Can anyone recommend some alternatives for financing a property like this that would increase its cash flow? We've thought about seller financing, but can't imagine someone selling a $649k house for a small down payment and even smaller monthly checks.

Thanks in advance for your replies!

[Daniel Maltsev]

Quote from @Chris Seveney:

Quote from @Daniel Maltsev:

Hello everyone,

Complete beginner here trying to figure out ways of financing a rental my family has been looking at. It's a 4/3 home that's currently on-market for 649k. The city is expanding and there is lots of land for sale around the area due to a newly built university (which in our opinion practically guarantees rent).

It costs 649k, for which we'd down pay 130k and take out a 15 yr ~6.25% fixed rate mortgage for the remaining 519k. We'd estimated rent to be around 4000/month – after mortgage payments and property taxes, we'd be left with only $700 per month of cash flow. Obviously, this isn't ideal, especially with the down payment being so large and the house needing renovation.

One of the biggest issues (apart from the price being higher than it should be) is the mortgage; I've listened to lots of BP videos and I've rarely hear anyone say they financed a property with a mortgage. Can anyone recommend some alternatives for financing a property like this that would increase its cash flow? We've thought about seller financing, but can't imagine someone selling a $649k house for a small down payment and even smaller monthly checks.

Thanks in advance for your replies!

This is the reality no one is talking about but they will sell you a course on how to buy real estate. There is a reason home sales are down a ton. Because home prices at todays rates do not make sense, especially for investment purposes. Now are there deals you can find, absolutely - but gone are the days of just finding any home on MLS, renting it and making money on it through rent or appreciation.

Hello Chris, thanks for your response. Well, now my question becomes, how are people continuing to find and/or create deals even with today's rates? And what exactly makes it a "good deal"? I've looked around and seen people taking $300/month of profit and calling it good – I understand that it depends on the amount invested in the property, but is there a generally accepted percentage that serves as a rule of thumb? 
I'll keep looking around for other methods of financing, because I find it hard to believe that the current rates are all that are holding people back from continuing to invest in real estate. Either way, thanks again for your reply!