I believe I have read every article on BP about financing but I'd like to know your guys strategy on how you financed your first investment property deal. I have little money down and looking at around $300,000 price tag in Denver for what I am looking for. Whether it be creative ways of how you made it work or just great stories, I'm curious what you all have to say.
What’s it worth and what’s your credit and income
@Adam Ferro Depends on a few factor:
- Net worth - liquid and non-liquid
- Credit score
- Income level
- Type of income: W2, 1099, self-employed
- Lender relationship
- Seller motivation (if looking into owner-financing)
- State of the lender's loan book (do they just need to give out a few reasonable loans to meet their targets?)
- Type of property: you can get better terms on owner-occupied residential properties than non-owner occupied properties
@Adam Ferro my first home was financed with 10% using a first time home buyer program. We had PITI. Remember the main objective is to get the property without breaking the bank. With interest rates on the rise buying now is probably the better long term than waiting.
@Bill S. Was your first finance a investment property? Just be curious if that would apply to the first time home buyer program?
@Adam Ferro it was our primary. We lived there 7 years and then refinanced it, taking the cashout. We took the cash to buy and rehab another primary while renting the first house.
@Adam Ferro I financed my first property with a First Time Homebuyer program the state of Rhode Island, which has similar home prices to most of CO (my 1st was $270k), offers. RI Housing offers a Downpayment Assistance and Closing Cost assistance program - allowing me to finance the DP & CC. These programs are subject to different states, I am not sure if CO offers one.
There are pro's & con's to this and, as you've seen, are entirely subjective to you, the investor. I elected for it considering I wanted to use my savings on renovations to get the property up to speed with 2018 & the potential rents I saw would cover the 1st mortgage and DPA/CCA mortgages. Yes, I now owe 101% CLTV still (after 8 months of payments) but my strategy for long term buy & hold is working as the rents are far and away covering the mortgage - most of the cash flow is going to cap ex, repairs, vacancy etc. - but it is allowing me to save for my next one.
Important items to consider: your investing strategy, how you plan to finance your next property, & your exit strategy.
@Alexander Zurn wow, very interesting. Very insightful. I believe that rent is still high enough in the area I'm looking to be able to cover rent in situation like that. I will have to weigh the best way to proceed. Right now me and my partner are planning on taking out a HELOC to put a down payment on a new property which will hurt until we can pay it off and just have mortgage to worry about.
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