Talked to Rocket Mortgage recently........
Real Estate Agent · Buffalo, NY · Member since 2020 · 163 posts · 28 votes
Talked to Rocket Mortgage recently........
Most Popular Reply
Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
6yQuestion: if you don't feel comfortable risking 25% on your investment, should the bank feel comfortable risking 95%? You don't have any real confidence of your ability to do this but you want the bank to make a bet on you.
Investing can be scary and maybe it's not for everyone. What do you think is wrong with your plan such that your 25% investment is at major risk?
You could always house hack a duplex or triplex if you want to go FHA.
Skyline Properties
70 Replies
- Sunnyvale, CA · Member since 2018 · 191 posts · 178 votes6y
Whoa whoa whoa. Let’s start from the beginning. Have you read the book rich dad poor dad?
You’re saying, “it’s too expensive to get started investing.” When really you should...
Aw crap...
You should ask your self “how can I afford it..” but not in a whiny way. And figure out the solution.
Then. You need should look at your savings rate. Do you listen to the bigger pockets money podcast? 40k in 5 years IMO not a lot when houses you’re trying to buy a rental for 200k. Do both of you work? Is there any area you can save up more money? Don’t tell yourself there’s nowhere else to save money. Figure out how.
- Investor · Louisville, KY · Member since 2017 · 199 posts · 253 votes6y
Do you have equity in your home that you currently live in? If so you can do a cash out refi and use the money for the down payment.
My two cents worth is if you are not willing to come up with the 25% that banks require to purchase a rental property through saving the money or pulling equity out of your house then you dont want to get into the rental business bad enough.
If it was easy to just walk into the bank and say "I want a loan on rental property" and it happen there would be alot more people in this business.
- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes6y
Originally posted by @Dale Miller:
Originally posted by @JD Martin:
Question: if you don't feel comfortable risking 25% on your investment, should the bank feel comfortable risking 95%? You don't have any real confidence of your ability to do this but you want the bank to make a bet on you.
Investing can be scary and maybe it's not for everyone. What do you think is wrong with your plan such that your 25% investment is at major risk?
You could always house hack a duplex or triplex if you want to go FHA.
@JD Martin Thank you for your honest reply. You are right I am lacking confidence being a newbie who hasn't made my first deal. I'm sure you were in my shoes at one time. I have been following bigger pockets for years and I just was under the impression that I wouldn't have have to put down 20-25% I had my sights set on FHA or something that allows 3 or 4% down. But Rocket mortgage told me otherwise. Requested 25% down.I'm Probably looking for a foreclosure or 2 unit around 100k or less to repair and rent out. My goal is to have a couple rentals to have extra income for now and enough to survive if I ever lose my job or become disabled.
I think you have a great goal! Now you just need to figure out the implementation.
There's no question it's scary risking the money you took several years to save up. Here's some words of comfort:
1. As long as you have a mortgage that doesn't put you under water, you should be able to hold on to property forever. So you can always wait for a good market if you need to sell.
2. Real estate tends to increase in value given enough time. Even considering recessions, etc.
3. Banks (especially today) will generally not let you get into a loan that is a dog. Appraisers are a lot harder than they were 10-12 years ago; lending standards are a lot tighter. If the bank approves your loan, that generally means they have confidence in your plan, and since they are on the hook for 75-80% of your loan that's a pretty high mark of confidence.
This isn't to say you don't need a plan or that the bank is omniscient; it just means that there are a bunch of safeguards in place that help keep you from driving off the cliff.
Skyline Properties - Member since 2018 · 8 posts · 5 votes6y
Hello Dale, why won’t you rent out your current house, buy a duplex and then house hack it? That would put you in a nice position to get some real estate rolling. You keep saying you can’t do that because you have a small family, is that right? Maybe they wouldn’t mind coming along for the ride. My wife is very hesitant with real estate but once I come up with a solid plan and walk her through it, she’s more at ease. It sounds like you have the right goals in mind and have admitted to lacking confidence, maybe the family senses that and you just need to find that confidence? I know the jump is scary but never making that leap leaves forever “what ifs”. That seems way scarier! Best of luck to you. Keep us posted.
- Los Angeles · Member since 2018 · 464 posts · 471 votes6y
@Dale Miller
Your profile says you're in New York. I don't know if this applies to the entire state, but NY does not have a reputation for cheap real estate.
If you haven't got 25% to invest locally, maybe you have enough to invest out of state. Maybe someplace in the Midwest will fit the bill.
Just research out of state investing. It's a completely different challenge.
- Rental Property Investor · Ithaca, NY · Member since 2015 · 1k+ posts · 1k+ votes6y
@Dale Miller
You could owner occupy it and then house hack. Also talk to your local credit union, they might be more flexible in their terms. You’ll be able to use your downpayment option while still investing. To save you from future pain, get ready to ante up 20-25% next property.
- Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes6y
Originally posted by @JD Martin:
Question: if you don't feel comfortable risking 25% on your investment, should the bank feel comfortable risking 95%? You don't have any real confidence of your ability to do this but you want the bank to make a bet on you.
Investing can be scary and maybe it's not for everyone. What do you think is wrong with your plan such that your 25% investment is at major risk?
You could always house hack a duplex or triplex if you want to go FHA.
Well said. Knowing what I know now (being an investor for only 8 years).. I would put down 30-35% on a SFH or apartment. For passive investments, I am looking for similar leveraged in the opportunities I invest in if I can help it.
That said OP, I wouldn't spend ALL my savings on a single deal. That can potentially make your RE investing career very short.
- Member since 2019 · 1k+ posts · 1k+ votes6y
@Mike Mendez
Putting less than 20% down on an investment property is an extremely bad idea. Just because every podcast tough guy and Instagram model/ renovator with 50k followers pretends it’s awesome doesn’t mean it is. There’s a reason those people generally end up earning the majority of their income from weekend courses and not actual real estate investing. Just look at the numbers of “omg what do I do my tenant got laid off”. Responsibly leverage the property. That doesn’t mean every dollar.
- Real Estate Agent · Buffalo, NY · Member since 2020 · 163 posts · 28 votes6y
Originally posted by @Peter Walther:
Dale, I recommend you join a local real estate investors group where you can exchange ideas with other investors in your area. If the deal you have makes sense you might even be able to find someone to partner with or a mentor to walk you through your first deal or two. I just looked at Meetup for Tonawanda, NY and see about 19 different groups under real estate. Good luck to you.
@Peter Walther I think that is a great idea. It would lower the anxiety going through the first deal and limit some mistakes if I had a mentor or someone to answer questions. Thanks @Peter Walther
- Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes6y
They say 1 year but in every situation I have experienced after 6 months if have a good reason the lender will OK you buying/moving. A good reason is wanting a bigger place, closer to work, etc. pretty flexible.
- Investor · Rochester, NY · Member since 2015 · 499 posts · 169 votes6y
You can find hard money for 12% and 2-- You just really have to make it happen. Do not give up.
- Real Estate Agent · Buffalo, NY · Member since 2020 · 163 posts · 28 votes6y
Originally posted by @Todd Dexheimer:
Look for seller financing deals, which most will be off market. Also be patient and wait, as there could be some distressed sellers in the near future. Down payments will still be 20%+, but the prices will be less.
@Todd Dexheimer Exactly! That is why I'm trying to get the ball rolling and get prequalified and an agent so I am ready incase there are distressed sellers and foreclosures in the next couple months.
- Real Estate Agent · Buffalo, NY · Member since 2020 · 163 posts · 28 votes6y
Originally posted by @Steven Ko:
Whoa whoa whoa. Let’s start from the beginning. Have you read the book rich dad poor dad?
You’re saying, “it’s too expensive to get started investing.” When really you should...
Aw crap...
You should ask your self “how can I afford it..” but not in a whiny way. And figure out the solution.
Then. You need should look at your savings rate. Do you listen to the bigger pockets money podcast? 40k in 5 years IMO not a lot when houses you’re trying to buy a rental for 200k. Do both of you work? Is there any area you can save up more money? Don’t tell yourself there’s nowhere else to save money. Figure out how.
@Steven Ko Thanks for your honest reply. I did read that book. Probably the best book ever read. I just am hesitant to drop 30k on a duplex at 150k because its going to need work and there will be additional costs. I'm hoping to pick up a foreclosure or rental at a discount in the next 6months. Maybe I wont have to put that much and it will be half that. Yes your right we can up our savings because we both work but seems like it takes forever. I think there will be some distressed properties in 2020 and should be ready for them.
- Real Estate Agent · Buffalo, NY · Member since 2020 · 163 posts · 28 votes6y
Originally posted by @Michael Jones:
Do you have equity in your home that you currently live in? If so you can do a cash out refi and use the money for the down payment.
My two cents worth is if you are not willing to come up with the 25% that banks require to purchase a rental property through saving the money or pulling equity out of your house then you dont want to get into the rental business bad enough.
If it was easy to just walk into the bank and say "I want a loan on rental property" and it happen there would be alot more people in this business.
@Michael Jones Yes we have equity in our home. 140k all paid off. Looking to take the next step and purchase a rental or two to add additional income for a few years then something to fall back on if I lose my job or become disabled and for retirement also. I agree with you there are rules that you have to be willing to follow to get loans. I know there would be a lot more people.
- Real Estate Agent · Buffalo, NY · Member since 2020 · 163 posts · 28 votes6y
Originally posted by @JD Martin:
Originally posted by @Dale Miller:
Originally posted by @JD Martin:
Question: if you don't feel comfortable risking 25% on your investment, should the bank feel comfortable risking 95%? You don't have any real confidence of your ability to do this but you want the bank to make a bet on you.
Investing can be scary and maybe it's not for everyone. What do you think is wrong with your plan such that your 25% investment is at major risk?
You could always house hack a duplex or triplex if you want to go FHA.
@JD Martin Thank you for your honest reply. You are right I am lacking confidence being a newbie who hasn't made my first deal. I'm sure you were in my shoes at one time. I have been following bigger pockets for years and I just was under the impression that I wouldn't have have to put down 20-25% I had my sights set on FHA or something that allows 3 or 4% down. But Rocket mortgage told me otherwise. Requested 25% down.I'm Probably looking for a foreclosure or 2 unit around 100k or less to repair and rent out. My goal is to have a couple rentals to have extra income for now and enough to survive if I ever lose my job or become disabled.
I think you have a great goal! Now you just need to figure out the implementation.
There's no question it's scary risking the money you took several years to save up. Here's some words of comfort:
1. As long as you have a mortgage that doesn't put you under water, you should be able to hold on to property forever. So you can always wait for a good market if you need to sell.
2. Real estate tends to increase in value given enough time. Even considering recessions, etc.
3. Banks (especially today) will generally not let you get into a loan that is a dog. Appraisers are a lot harder than they were 10-12 years ago; lending standards are a lot tighter. If the bank approves your loan, that generally means they have confidence in your plan, and since they are on the hook for 75-80% of your loan that's a pretty high mark of confidence.
This isn't to say you don't need a plan or that the bank is omniscient; it just means that there are a bunch of safeguards in place that help keep you from driving off the cliff.
@JD Martin: Thank you sir! I'm so new that I"m still working on getting prequalified and an agent so I can get the ball rolling for when there are distressed properties in the next couple months. I honestly think I need to be ready for solid opportunities that will be low risk for me and my family. Sounds like it is a slower process and more strict from when I bought first house in 2001.
- Real Estate Agent · Buffalo, NY · Member since 2020 · 163 posts · 28 votes6y
Originally posted by @Franklin Carpenter:
Hello Dale, why won’t you rent out your current house, buy a duplex and then house hack it? That would put you in a nice position to get some real estate rolling. You keep saying you can’t do that because you have a small family, is that right? Maybe they wouldn’t mind coming along for the ride. My wife is very hesitant with real estate but once I come up with a solid plan and walk her through it, she’s more at ease. It sounds like you have the right goals in mind and have admitted to lacking confidence, maybe the family senses that and you just need to find that confidence? I know the jump is scary but never making that leap leaves forever “what ifs”. That seems way scarier! Best of luck to you. Keep us posted.
@Franklin Carpenter Thanks for your reply. That would be a plan to start. My wife is like that too. I have a plan but its difficult to talk about because we havent made our first deal unless you count our house. Yes it is a scary jump and there is a lack of confidence but I'm going to try to do my best because this stock market is a roller coaster that wipes out years of gains in just days. Thanks I keep you posted if anything interesting happens.
- Real Estate Agent · Buffalo, NY · Member since 2020 · 163 posts · 28 votes6y
Originally posted by @Alvin Sylvain:
@Dale Miller
Your profile says you're in New York. I don't know if this applies to the entire state, but NY does not have a reputation for cheap real estate.
If you haven't got 25% to invest locally, maybe you have enough to invest out of state. Maybe someplace in the Midwest will fit the bill.
Just research out of state investing. It's a completely different challenge.
@Alvin Sylvain: Thank you for your reply. The properties in my area are between 100k-200k. I wouldnt feel comfortable investing more than an hour away from where I live especially for the first 2 or 3 rental property purchases.
- Real Estate Agent · Buffalo, NY · Member since 2020 · 163 posts · 28 votes6y
Originally posted by @Nick Rutkowski:
@Dale Miller
You could owner occupy it and then house hack. Also talk to your local credit union, they might be more flexible in their terms. You’ll be able to use your downpayment option while still investing. To save you from future pain, get ready to ante up 20-25% next property.
@Nick Rutkowski Thanks for your reply. Those are great ideas. I heard local credit unions are worth a shot.
- Tacoma, WA · Member since 2014 · 77 posts · 92 votes6y
Down payment requirements on non-owner occupied investment property for most lenders are typically 25% and 6 months reserves PITI or more. Going to vary slightly depending on your debt-to-income, credit scores, etc. Expect higher interest rates as well vs owner-occupied rates.
Reach out to your local credit unions for generally best rates, conditions, etc. Your paid off home could be an option for helping your current concerns.
- 6yMarvin MengPro MemberInvestor · Edwardsville, IL · Member since 2014 · 142 posts · 54 votes
I agree with you that the price for entry in real estate is high. I would've never been able to had I needed 20% (the norm in my area). I was able to take out a home equity loan which I used for the down payment on my first rental, then refi that one to buy the second (now known as a house hack). I don't know your situation but options you might have (assuming it's a great deal) would be to use equity in your home and/or a 401K loan.
But please make sure it's a good deal! That we you can refi/cash out and be on your way to your next deal with more options than you have today. Good luck (and congratulations on getting started)! Don't give up!
- 6yPaul DefnginPro MemberLender · Rockville, MD · Member since 2008 · 498 posts · 199 votes
Originally posted by @JD Martin:
Question: if you don't feel comfortable risking 25% on your investment, should the bank feel comfortable risking 95%? You don't have any real confidence of your ability to do this but you want the bank to make a bet on you.
Investing can be scary and maybe it's not for everyone. What do you think is wrong with your plan such that your 25% investment is at major risk?
You could always house hack a duplex or triplex if you want to go FHA.
Best answer.
- Real Estate Agent · Buffalo, NY · Member since 2020 · 163 posts · 28 votes6y
Originally posted by @Account Closed:
@Mike Mendez
Putting less than 20% down on an investment property is an extremely bad idea. Just because every podcast tough guy and Instagram model/ renovator with 50k followers pretends it’s awesome doesn’t mean it is. There’s a reason those people generally end up earning the majority of their income from weekend courses and not actual real estate investing. Just look at the numbers of “omg what do I do my tenant got laid off”. Responsibly leverage the property. That doesn’t mean every dollar.
@Kris H Thank for your feedback I appreciate it!
- Real Estate Agent · Buffalo, NY · Member since 2020 · 163 posts · 28 votes6y
Originally posted by @Henry Lazerow:
They say 1 year but in every situation I have experienced after 6 months if have a good reason the lender will OK you buying/moving. A good reason is wanting a bigger place, closer to work, etc. pretty flexible.
@Henry Lazerow Those are good ideas. I agree thanks ! - Real Estate Agent · Buffalo, NY · Member since 2020 · 163 posts · 28 votes6y
Originally posted by @Martin Grizzanti:
You can find hard money for 12% and 2-- You just really have to make it happen. Do not give up.
@Martin Grizzanti: Thank you for the motivating message !
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