Financing a $60k Property...literally the WORST!

35 Replies

I'm not sure if anyone of you high rollers have run into this problem, but getting a mortgage on a $60k rental property is brutal!  Investment properties usually require AT LEAST 20% down so that makes my loan $48k, and many require 25% which puts it at $45k.  Most banks won't touch anything under $100k, and even the ones who do have a floor of $50k for their loan amount. Naturally, I've contacted several Credit Unions and even a lot of them cap it at $50k and I've only been able to find 1 or two that will do less, but the rates leave much to be desired.  

The house is a 3 bed 2 bath half duplex, selling for $60k and can rent as-is for $900 easily and up to $1100 with about $10k in repairs.  All in, I'd be looking at ~$350 a month of cash flow if I could get a solid 30 year mortgage on a $48k loan, unfortunately, that's easier said than done. 

I was wondering if any of you guys had advise for a newbie like me in this situation (having only $20k to invest with really limits my options on this one).  I'm in the Dallas area, so if you know any good local banks or credit unions, I'd certainly appreciate that too. 

Seems like this price range is a cash-buyers market unfortunately.  

@Charlie Fitzgerald

Yeah the best I heard was 20% down  @ 3.375% for a 15 year term, 3k closing costs, and no escrow.  Do you like that better than 20-25% down @ 4.25-4.5% for a 30 year term? It eats away about $100 in cashflow but still leaves me around $200 or so a month and obviously helps a ton with equity. 

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@Kelton Johnson    here's something creative.

simply pay 2k more for it so you can get the loan you want.. only affect your cash flow by 10 bucks maybe... and you get the deal instead of missing it... seems logical to me.

these rates are not going to be around a lot longer so why quibble over 2k when you will make that up in the first year in cash flow.

@Jay Hinrichs

Touche.  The property already has multiple offers and I'd only need to put down $62500 to get to a $50k loan.  Trust me, I've considered it and even asked several credit unions about their rates for that price.  However, they are still about the same as the 1 credit union that is willing to give it to me at $60k (just waiting to see if they can get the application pushed through).  If not, that's probably my best bet to actually land the house before they accept another offer.

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@Dawn Anastasi

You're absolutely right, I made about 8 calls to different lenders today, but they either didn't offer it, or it was only 15 year terms.

One option I had almost forgot was a bank who had 15% down (9k down, 51k loan) @ 5% (dirty I know). But still could be a solid option as it would cash flow well even at that ugly interest rate, and require the least down.

@Kelton Johnson , unless this is an owner occupied property, 5% is not bad.

Another option and slight variation to what @Jay Hinrichs mentioned - offer $63k and ask for a $3k sellers assist.

Or ask the seller to finance all or part of it by showing them how much more a 5% interest over 3-5yrs will add to their sale price.

Or try a sub-to and refinance in a year if you can improve the value and have the property appraise for higher.

@Percy N.

I like the idea of a sellers assist quite a bit, is there something about them I should know? And you're right 5% isn't bad, but that 4.25% is just sexier I guess.

@Shawn Thom

Unfortunately I haven't had time to do that with a full-time job and this being my first investment property, but I'm sure you're right. Food for thought.

Originally posted by @Kelton Johnson :

Dawn Anastasi

You're absolutely right, I made about 8 calls to different lenders today, but they either didn't offer it, or it was only 15 year terms.

One option I had almost forgot was a bank who had 15% down (9k down, 51k loan) @ 5% (dirty I know). But still could be a solid option as it would cash flow well even at that ugly interest rate, and require the least down.

 Hi All-

I noticed the note about the 5% interest rate, I have to say, fairly cheap for an investor loan with only 15% down, I would be interested int his contact myself/resource. I do not play in the price arena you are in, I have evolved over the years to the $100k turnkey range, but certainly would encourage you to consider those loan terms. The advice, is based on a series of assumptions, as I am not familiar with your financials. But, bottom line, 5% not that expensive, not that ugly - using someone else's money to leverage comes at a price. What is the final ARV value of this home ?

Originally posted by @Jay Hinrichs :

@Kelton Johnson    here's something creative.

simply pay 2k more for it so you can get the loan you want.. only affect your cash flow by 10 bucks maybe... and you get the deal instead of missing it... seems logical to me.

these rates are not going to be around a lot longer so why quibble over 2k when you will make that up in the first year in cash flow.

 Very creative!!!!

@Steven Gesis

I've been looking at this as mostly a cashflow play, so I haven't looked at too many comps. But based on my very loose estimates, I would say it could go for $70k with $2.5k in repairs, and upwards of $80k with $5-10k in remodel. It would be great if I could do the BRRR tactic on this one!