How can I finance a $53,000 rental property? Good credit, 20% down...would prefer to go conventional so I contribute my down payment + closing costs only, recoup, repeat (cash flow would be AWESOME on a $300/month mortgage payment). All of the online lenders I've tried want the property to cost at least $64,500 which makes no sense to me...they'll pre-approve me for $155K but not $53K? Madness!
Lender · Charlotte, NC Area · Member since 2016 · 12 posts · 4 votes
6y
A good alternative is to find someone that had a self directed IRA that is willing to lend you the money. They act as the bank and are in first position just like the bank. To protect you both go through the same procedures to close the transaction procuring title insurance, hazard insurance with the lender as the insured ,etc. You create terms based on what the lender/IRA holder desires and of course what makes sense for you. If you are not plugged into your local real estate investors group or meet up you are making it harder on yourself. That is a great way to meet people with money to lend and a great way for them to get to know you. Another option is to always ask the seller if they are willing to seller finance all or a portion of the sale. Don't be afraid to ask what they are going to do with the money. Sometimes they only want to pay a bill or two or buy a car or boat and they just dont need all the money down. Maybe they are a burned out landlord and just dont want to deal with the tenants any more. Find their pain point and fix it. You would still go through the same closing process.
Rental Property Investor · Batavia, IL · Member since 2018 · 452 posts · 672 votes
6y
@Oliver Roe Most lenders have a minimum lending limit which actually can make cheaper properties harder to finance and will often have a higher interest rate. The reason being, the lender makes very little money from these types of loan so they increase interest rate in order to get something out of it. Below a certain threshold is just a waste of time on their part. For a purchase price that low, you are probably going to have to find a hard money lender or private lender to get the cash to purchase. Could always look to refinance into a conventional loan later and maybe even add a little equity into the property in the mean time.
Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
6y
It makes perfect sense . They want to make handsome return . If they give you a great rate and a short term they won’t make much in interest . Also you need to realize it is a lot of trouble for the bank to go through the process itself . It is as much cost and time for the bank to write out a million dollar loan as it is a 50k one so there’s that too
Lender · Charlotte, NC Area · Member since 2016 · 12 posts · 4 votes
6y
A good alternative is to find someone that had a self directed IRA that is willing to lend you the money. They act as the bank and are in first position just like the bank. To protect you both go through the same procedures to close the transaction procuring title insurance, hazard insurance with the lender as the insured ,etc. You create terms based on what the lender/IRA holder desires and of course what makes sense for you. If you are not plugged into your local real estate investors group or meet up you are making it harder on yourself. That is a great way to meet people with money to lend and a great way for them to get to know you. Another option is to always ask the seller if they are willing to seller finance all or a portion of the sale. Don't be afraid to ask what they are going to do with the money. Sometimes they only want to pay a bill or two or buy a car or boat and they just dont need all the money down. Maybe they are a burned out landlord and just dont want to deal with the tenants any more. Find their pain point and fix it. You would still go through the same closing process.
Thanks for all the insight and help for this rookie!
Of all suggestions, HML or personal loan to refi is intriguing, but wouldn't I run into the same issue if I went to refi in 3 months and the property still wasn't worth $100K? Or is there a lower limit on refi?
Thanks for all the insight and help for this rookie!
Of all suggestions, HML or personal loan to refi is intriguing, but wouldn't I run into the same issue if I went to refi in 3 months and the property still wasn't worth $100K? Or is there a lower limit on refi?
Some HML offer rental loans with 30 year amorts at starting at 6-7%. So you need to be sure that the numbers still work. That being said, $53k with 20% down is a $42,400 loan, which still may be too small for them to do. I may have some HML you can speak with. Where is the property located?
Lender · Charlotte, NC Area · Member since 2016 · 12 posts · 4 votes
6y
Your small local banks are a great way to refinance your property. The ones that have one or two branches and credit unions tend to offer smaller balance loans. In addition, I mentioned the self directed IRA option. They will do long term as well.
Thanks for all the insight and help for this rookie!
Of all suggestions, HML or personal loan to refi is intriguing, but wouldn't I run into the same issue if I went to refi in 3 months and the property still wasn't worth $100K? Or is there a lower limit on refi?
Some HML offer rental loans with 30 year amorts at starting at 6-7%. So you need to be sure that the numbers still work. That being said, $53k with 20% down is a $42,400 loan, which still may be too small for them to do. I may have some HML you can speak with. Where is the property located?
Yeah it's a tiiiiny loan! Property is in Farmington, NM. I've actually found one of the local banks (as Wendy mentioned) that doesn't have an issue with the amount, so fingers are crossed!