Financing help/need advice how to proceed

3 Replies

I need advice how to proceed:

I am a new investor.

We've purchased SFR last November. Now I am very actively looking for our first rental property-2 or 3 family. I am also trying to arrange financing ahead of time so that we will be ready when the time comes.

I have several options but do not know which one is best to fit my investment goals. I like to add a property about every other year. Any and all advice is very much appreciated.

Option 1

Use line of credit (35K) at 7.85% for down payment (plus some of my own money) to get to 20%. Then conventional mortgage; I was told I need to put down 25% instead of 20%; (I think that’s too much money to lock up at one time) or

Option 2

Use FHA Financing (then I have to live at the property, which I really do not want) since we fixed up our house and currently live there. Originally we purchased SFR with an intention of flipping it but accountant said to keep it for 2 years. So we are stock for now.

Option 3

Wait until November (12 months) before I can refinance my current house with a higher appraisal and take the money out for our next rental. Most of the banks require at least 12 months seasoning before they can use new appraisal. We purchased an old estate home, which after we fixed it worth a lot more than what we paid for it back last year.

So for now I am a bit confused as to which way to go about purchasing our rental.

Thank you veryone.

It really comes back to personal opinion but if I had those options I would go FHA and live in one of the units and then rent the current SFR you live in. It will most likely increase your cash flow and will definitely reduce the amount of funds you need to bring to closing for the multifamily.

From what I have been hearing FHA has a new regulation that if one does not put down 20% that PMI will continue if you do not refinance. Maybe someone in the know can chime in on the validity of this?

I think you need 5% to avoid paying PMI. Usually FHA require 3% down but you will have to pay PMI. I think if you put 5 or more you will avoid paying PMI. Please confirm.

Thank you

Jeffrey you are right. My gut feeling is to go with FHA....but we put so much work into our SFR and moving into it was hell - just the though of moving out again makes me nutz.....but of course FHA makes more sense......

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