Talked to Rocket Mortgage recently........

Buying & Selling Real Estate
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Talked to Rocket Mortgage recently........

Dale Miller
Real Estate Agent · Buffalo, NY · Member since 2020 · 163 posts · 28 votes

Hello Everyone! 

Was recently told that I need to make a 20-25% down payment on a rental property. Told them I was interested in making 3-5% down so I can have funds to make repairs.I asked about FHA. They said FHA isnt available unless you live in the property for one year. Told them not going to live in it just fix and rent out. How am I supposed to invest in my first rental if I have to drop 25% of my savings on just the down payment? (Probably 40k). Don't feel comfortable risking what took me over 5 years to accumulate

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JD MartinBusiness Member
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Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
6y

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.

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  • Dale Miller
    OP
    Real Estate Agent · Buffalo, NY · Member since 2020 · 163 posts · 28 votes
    6y
    Originally posted by @Marvin Meng:

    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! 

    @Marvin Meng Thanks for your honest reply. That sounds like something to consider. We have 100% equity in our home now. I will have to check into that. Never did a home equity loan or refi. So it is all a learning experience. I just want to be careful and not get burned ya know. I appreciate your help and motivation!

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  • Marvin MengPro Member
    Investor · Edwardsville, IL · Member since 2014 · 142 posts · 54 votes
    6y
    Originally posted by @Dale Miller:
    Originally posted by @Marvin Meng:

    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! 

    @Marvin Meng Thanks for your honest reply. That sounds like something to consider. We have 100% equity in our home now. I will have to check into that. Never did a home equity loan or refi. So it is all a learning experience. I just want to be careful and not get burned ya know. I appreciate your help and motivation!

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  • Marvin MengPro Member
    Investor · Edwardsville, IL · Member since 2014 · 142 posts · 54 votes
    6y

    Please don't take just my advice on house hacking - there are risks (I'm sure you're aware). But BP has tons of podcasts on it. But if you've got 100% equity, I'd say you have great BRRRR options. Keep posting how this progresses please.

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  • Account Closed
    Rental Property Investor · Indianapolis, IN · Member since 2020 · 562 posts · 554 votes
    6y

    @Dale Miller that’s just how it works for rental property with hard money lenders. If you don’t live there you need to put 20% down.

    Maybe a house hack would be a better plan for you. Buy a duplex. Live in one unit and rent out the other. Some banks will tear that differently since it is your primary residence.

    0Reply
  • Anthony Thomas Hager
    Member since 2020 · 2 posts · 1 vote
    6y

    @Dale Miller

    Hi Dale, just a thought, why not move to a different market? Your 40k may not seem much in the market you're looking at but in a rural market where fixer uppers are selling for 30-40k this is far more significant. Find the right deal in those markets, and pair with a hard money lender for the rehab. Then cash out refinance (BRRRR) at the end of the rehab once you've rented it out. You could scale up your rentals as your develop a track record.

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  • Peter Walther
    Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes
    6y
    Originally posted by @Dale Miller:
    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 

     Your welcome

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  • Peter Walther
    Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes
    6y
    Originally posted by @Dale Miller:
    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

     I meant You're welcome

    0Reply
  • Nick Barlow
    Warsaw, IN · Member since 2017 · 229 posts · 270 votes
    6y

    @Dale Miller Covid 19 changes the game dramatically. Lenders still remember 2008 and they’re playing the current situation like that...25% down right now (really, since about March 15th) is stable stakes just to play. If that’s outside the comfort zone, then it’s time to stay on the sidelines.

    For the record, I’m on the sidelines for the next 60 days, or maybe longer. Depends how May rent collection turns out.

    0Reply
  • Anthony Liguori
    Rental Property Investor · NJ (new jersey) · Member since 2019 · 113 posts · 16 votes
    6y

    @JD Martin

    What does house hack mean?

    0Reply
  • Anthony Liguori
    Rental Property Investor · NJ (new jersey) · Member since 2019 · 113 posts · 16 votes
    6y

    @Stephanie P.

    Awesome post.

    0Reply
  • Odie Ayaga
    Specialist · Delran, NJ · Member since 2016 · 2k+ posts · 951 votes
    6y

    You can get hard money loans with 0% down, but if you're looking for conventional loans you're generally looking at no less than 20% down

    0Reply
  • Stephanie P.Pro Member
    Washington, DC Mortgage Lender/Broker · Member since 2016 · 4k+ posts · 2k+ votes
    6y

    @Anthony Liguori

    Thanks

    0Reply
  • Anthony Liguori
    Rental Property Investor · NJ (new jersey) · Member since 2019 · 113 posts · 16 votes
    6y

    @Odie Ayaga

    Is there any good deals in NJ right now ?? I own two properties and been looking to purchase more but everything is priced WAY above market.... where are the good deals anymore or which market can you get fixer uppers for 40-50k??

    0Reply
  • Odie Ayaga
    Specialist · Delran, NJ · Member since 2016 · 2k+ posts · 951 votes
    6y

    @Anthony Liguori not my area of expertise, but my experience is that there's deals everywhere it just depends on what you're looking for and how you're looking for it. There's some places where there's properties in that range, but they might be tough neighborhoods or require a hefty rehab (or both)

    0Reply
  • Dale Miller
    OP
    Real Estate Agent · Buffalo, NY · Member since 2020 · 163 posts · 28 votes
    6y
    Originally posted by @Marvin Meng:

    Please don't take just my advice on house hacking - there are risks (I'm sure you're aware). But BP has tons of podcasts on it. But if you've got 100% equity, I'd say you have great BRRRR options. Keep posting how this progresses please.



    @Marvin Meng: I think I have good BRRRR options also. but not sure which way to go on financing if Heloc or Hel or cash out Refi is they way to go  and which interest rate is better and lowest fees. Sure I will let you know how I am doing with the decision but not getting very far at the moment

    0Reply
  • Dale Miller
    OP
    Real Estate Agent · Buffalo, NY · Member since 2020 · 163 posts · 28 votes
    6y
    Originally posted by @Account Closed:

    @Dale Miller that’s just how it works for rental property with hard money lenders. If you don’t live there you need to put 20% down.

    Maybe a house hack would be a better plan for you. Buy a duplex. Live in one unit and rent out the other. Some banks will tear that differently since it is your primary residence.



    @Dave E. I hear ya. If I was younger and single house hack would definitely be the choice. Definitely looking for a duplex.

    0Reply
  • Dale Miller
    OP
    Real Estate Agent · Buffalo, NY · Member since 2020 · 163 posts · 28 votes
    6y
    Originally posted by @Anthony Thomas Hager:

    @Dale Miller

    Hi Dale, just a thought, why not move to a different market? Your 40k may not seem much in the market you're looking at but in a rural market where fixer uppers are selling for 30-40k this is far more significant. Find the right deal in those markets, and pair with a hard money lender for the rehab. Then cash out refinance (BRRRR) at the end of the rehab once you've rented it out. You could scale up your rentals as your develop a track record.



    @Anthony Thomas Hager There are properties under 150k in my area but they aren't many to choose from. I hear ya about analyzing a less expensive market. BRRRR is what i'd like to do. Thanks

    0Reply
  • Dale Miller
    OP
    Real Estate Agent · Buffalo, NY · Member since 2020 · 163 posts · 28 votes
    6y
    Originally posted by @Nick Barlow:

    @Dale Miller Covid 19 changes the game dramatically. Lenders still remember 2008 and they’re playing the current situation like that...25% down right now (really, since about March 15th) is stable stakes just to play. If that’s outside the comfort zone, then it’s time to stay on the sidelines.

    For the record, I’m on the sidelines for the next 60 days, or maybe longer. Depends how May rent collection turns out.



    @Nick Barlow: I'm trying understand if a HELOC or home equity loan is the way to go to use that to fund the rental property. I'm always on the sidelines and I just hope and pray I can be put in the game someday

    0Reply
  • Dale Miller
    OP
    Real Estate Agent · Buffalo, NY · Member since 2020 · 163 posts · 28 votes
    6y
    Originally posted by @Odie Ayaga:

    You can get hard money loans with 0% down, but if you're looking for conventional loans you're generally looking at no less than 20% down



    @Odie Ayaga: I hear ya. The ideal situation would be to get a loan that allows me to put 10% or less. The best scenerio would be able to put 3% down for FHA but this would be the second home.

    0Reply
  • Mailei MaloaPro Member
    Member since 2018 · 11 posts · 4 votes
    6y

    Hello Dale,

    I am in the same boat as you. First time trying to purchase a home with as little down as possible. I have analized over a hundred deals nad have 3 on my top list to go after. I have contacted rocket mortgage, better mortgage, and quicken loans and they want all of my saved money for the 25% down payment. After reading the answers on your thread I have reached out to my local credit unions and am still waiting for a response. I am still unaware if we should be making offers on these properties contingent on us getting financing? Plus the loan finding seems to be the hardest for me than finding the rest of the team because we are new and do not have any history with a bank or lender. I am at the same step you are on this journey and just remmebr that we have to take out all of the emotions out of the dealing with all of this even the brutal honest advice from some of the seasoned veterans. Keep going 1 more step to our financial freedom!

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