Finance options for first purchase

[Tim M.]

Hey everyone, this is my first post on the forums here. I don't think theres a podcast I haven't listened to at least once over the last 5 years, and I feel like I've read every book available on investing in the multifamily space, but now it's time to buy.

I'm looking for some guidance on the financing side of things though, and any input would be greatly appreciated.

Context:

Im 42, with a fully paid off home, valuation I'm guessing around 1mil (brand new build that cost $900k, sitting on 5 acres with land valued at roughly $50k per acre). I also have $350k in cash sitting 4-week T-Bills.

We have zero debt at all and have a tippy top credit score.

I will be transitioning out of my full time job shortly and am looking to finally get into the multi-family space to provide for my family.

I'm looking to stay in my local market, mostly because this would be my first deal and I'm a little nervous.

My question though, what would be the best way to finance the deal?

Should I do a cash out refi on the house and combine that with my cash for a downpayment on something big?

Should I cash out refi the house and combine that with my cash as the total amount to spend?

Should I use the cash for one deal, and the cash out refi for another deal?

Are there other options that I haven't thought of or am unaware of?

I would rather have one big deal than multiple smaller deals.

Any help, again, would be greatly appreciated.

Thanks everyone

[Ryan Prichard]

Hi Tim, 

First, I want to say congratulations on beginning your investment journey! Now, as far as answering your question goes that can depend on a few different variables. One tool that I've been recommending to many of my buyers is the all-in-one loan. It is a loan program in which your loan can act as a bank account. Essentially, it's a home loan mixed with a HELOC. The advantage to this loan vs many other similar loans is that the all in one loan calculates interest daily, whereas a traditional mortgage uses an amortization schedule. This key difference leads to you paying down the principal substantially faster than other loans with a typical payoff timeline usually around 13-17 years when keeping the same payment as a traditional loan.

You may think that this sounds too good to be true and are looking to see what the catch is to this loan. The catch is that this loan also acts as a home equity line of credit. This means that at any point you can withdraw your equity to use towards repairs, debt payoffs, or as a down payment for future homes. The advantage for the lender is that they know you will likely have this loan for a longer period of time than a traditional mortgage and the advantage to you is that you will pay less interest over time and keep your funds liquid in case you need them.

If this doesn't seem like the right fit for you, then a DSCR loan may be a better fit. This is a loan you can do in which you don't need to have any qualified income, as long as the property you're purchasing covers the monthly payment. Please let me know if you have other questions or if you would like to connect on a phone call to discuss more options.