Financing Investment Property, Where to Go

6 Replies

I'm looking at a $70,000 home. Banks want 25% down payment, if they are willing to lend at all. I have $8,000 cash that I can part with right now. This would be my second investment property. It is a 3 bedroom house, so I can rent it out for $1,500 per month.

I am frustrated that my only options is a bank. I am uneducated about how to approach other options. I know that hard money exists, and I know that there are portfolio lenders too. But these options seem far fetched to me. I am very familiar with peer-to-peer lending, but then what? I take my peer-to-peer loan to a bank? My other investment property I own outright, I paid all cash for it. So, I could get a refinance loan? My credit score is 740, but I feel that banks are still shy about investment properties.

How does one acquire $70k? it seems like a large mountain to climb for me, but I'm dedicated and motivated to climb up there.

"Each mountain is scaled one step at a time" - Said some wise sage

I owned my first rental outright and got a line of credit on that house. I then used that LOC as a down payment on my next home. I'm currently paying down the LOC to use as another down payment.

I've read somewhere (and found it's true) that the benefits of REI really start hitting home when you reach 5+ units. I'm at 5 units, and it was about 1 month after I got the fifth unit rented that I was like "OH, this is why it makes a TON of sense to own property."

Hard money would cost you to much for a rental, Ref sounds good.

Line of credit may work better and cheaper.

@Liam Goble

Thanks for the response. What is the timing on all of this though? Do I need to focus on one property, get a line of credit, then get a bank loan? Is there a specific order of events that you would go by? Sometimes properties disappear if you don't act fast!

I am currently talking with Quicken Loans about a mortgage. My next step is to (as you suggested) get a line of credit from US Bank. I have not been approved for anything yet though, this is all just phone calls and questions so far.

No traditional lender would lend on a rental with less than 25% down. They will also want to see certain amount of reserves. So 8K is nowhere near enough to buy the $70K property. You could refi the other property you bought for cash. Thats probably the best option. As long as you have good W2 income with a 740 credit score you should be able to get about 70-75% of the value of the other property out.

@Anish Tolia

Okay great, thank you!

I think that I will talk to US Bank about a LOC or refinance. The property I own currently is valued at $80k, so that'll get me some capital I hope. My W-2 income low, around 15k, since I am an independent contractor most of the time.

The W2 may be a tough nut to crack, but I'm sure you'll find a way around that.

Depending on how the bank decides to value your house (appraisal or bench appraisal), the LOC can take a few days or a few weeks. Mine was a bench appraisal, meaning they used the county tax records as the 'value' of the property. I didn't entirely agree, but it got me the money I needed at the time.

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