House Hack #2. How do I finance it?!
Hi everyone!
I'm about 7 months into my first house hack in Chicago and it's going great! It's only a duplex, so I'm not quite living for free, but I will cash flow about $250/door once I move and rent out my unit. I'm obviously excited about how well this went and was hoping to continue buying a new house hack every year, while holding and renting the others.
My big issue now is financing! I bought my current duplex for $600k and I am starting to really get to know the area. I was hoping to continue to buy properties at that price point or higher, but I'm not sure that will be possible without a large (~25%) down payment. I bought the current property with a VA loan and about 7.5% down. Unless I sell that, I can't use the VA loan again, so the other low-down-payment option I considered was FHA. I didn't realize until recently that FHA loans in my area are capped at $565k for a 3-unit and $703k for a 4-unit. Unless I move out of the city or to a more dangerous area, it will be extremely hard to find a property for those prices (especially one that meets FHA standards).
I'm starting to call local banks in search of portfolio loans, since I've heard rumors of local bank loans with 5% or 10% down and no PMI. I'd like to keep my down payment to $50k or less, but might be able to swing $80k with contributions from friends/family. I'm currently looking at properties in the $500k - $850k range, but those at the lower end wouldn't qualify for FHA (maybe a 203k). With the current property still at about 92% LTV, I'm worried that trying to essentially double my debt will scare off most lenders.
I know there are a ton of people in the BP community who built their real estate businesses like this. How did you make the jump from your first house hack to your second? Any tips on getting low-down-payment financing? Am I being unreasonable trying to stay at or above the $600k price point? I would hate to have to slow my momentum just to fund a down payment.
Thanks for the help!
Mike