Rental Property Investor · Kansas City · Member since 2018 · 43 posts · 34 votes
I recently have had the chance to buy a dream property of mine as an investment opportunity. This is a house I lived in while in college and I have had my eye on it every since. The owner recently reached out to me wanting to sell and I really want to buy. I have gotten the insurance quote but when I went to banks to begin the mortgage process I was shocked to find out that Down Payments for investment properties must be 20%-25% and most are on a 20-year loan. HOW IN THE HELL is anyone buying right now? What can I do here? I recently sold my last investment property because of distance and am eager to get back in it, but now it seems next to impossible. Im very very frustrated to say the least.
I recently have had the chance to buy a dream property of mine as an investment opportunity. This is a house I lived in while in college and I have had my eye on it every since. The owner recently reached out to me wanting to sell and I really want to buy. I have gotten the insurance quote but when I went to banks to begin the mortgage process I was shocked to find out that Down Payments for investment properties must be 20%-25% and most are on a 20-year loan. HOW IN THE HELL is anyone buying right now? What can I do here? I recently sold my last investment property because of distance and am eager to get back in it, but now it seems next to impossible. Im very very frustrated to say the least.
Buy a duplex with FHA loan only 3% down live in one side and rent the other half
Buy a 3 BR SFH with 3% down live in one BR Rent out the other 2 bedrooms
Buy a SFH fixer upper 3% down FHA live in it while fixing it up sell it
Get a second job save all the money from that job for a year use it for the down payment
Find a fixer upper with owner finance
Go in with a partner. They supply the down payment you do the work
Rental Property Investor · Lexington, KY · Member since 2012 · 115 posts · 64 votes
5y
You have to hustle to find deals right now. They won't fall in your lap. When you find good deals, BRRRR them so that you don't have to park 20% of your cash in it. There's plenty of lenders who will do 25-30 year amortizations.
Rental Property Investor · Corvallis, OR · Member since 2018 · 840 posts · 1k+ votes
5y
@Grant Doyle would the seller entertain an owner carry with less down? I have done several of these and the key is showing the seller that THEY can now be the bank for the first time ever! Create a win win and see how you can achieve their goals as well! It can be done but be persistent and be tactful!
Rental Property Investor · Kansas City · Member since 2018 · 43 posts · 34 votes
5y
@Zac P. The house would be a student rental so BRRRR'ing wouldn't make a ton of sense here. @Todd Powell The seller does not own the property outright so we would not be able to do seller financing right? Is there another way?
Rental Property Investor · Concord, NC · Member since 2016 · 1k+ posts · 3k+ votes
5y
My take - Only at tax/foreclosure sales and auctions. Investors cannot compete with owner/occupants on MLS listings. You have to be willing to take smart risks and close with no friction to make a decent deal currently. By blind luck, I started in 2008 and for several years you could not make a bad deal if you tried. Not today.
@Grant Doyle Reach out to other lender(s) to see about getting a 30 year loan to lower the payment for the first thing.
Create a marketing pitch once you have figured out your cash flow and see if you can get 1-2 people to loan you the remaining down payment you need. Since I’m assuming it’s not a HUGE amount it wouldn’t be a syndication deal but rather a loan at a good enough percentage rate to interest someone if you can make it work. 7% paid each month amortized over 30 years with balloon payment in 3 years. Then you refi them out at end of the term.
Of course the cash flow would have to be enough to cover the monthly mortgage and payment to the lender.
I recently have had the chance to buy a dream property of mine as an investment opportunity. This is a house I lived in while in college and I have had my eye on it every since. The owner recently reached out to me wanting to sell and I really want to buy. I have gotten the insurance quote but when I went to banks to begin the mortgage process I was shocked to find out that Down Payments for investment properties must be 20%-25% and most are on a 20-year loan. HOW IN THE HELL is anyone buying right now? What can I do here? I recently sold my last investment property because of distance and am eager to get back in it, but now it seems next to impossible. Im very very frustrated to say the least.
Buy a duplex with FHA loan only 3% down live in one side and rent the other half
Buy a 3 BR SFH with 3% down live in one BR Rent out the other 2 bedrooms
Buy a SFH fixer upper 3% down FHA live in it while fixing it up sell it
Get a second job save all the money from that job for a year use it for the down payment
Find a fixer upper with owner finance
Go in with a partner. They supply the down payment you do the work
Lender · Omaha, NE · Member since 2008 · 1k+ posts · 1k+ votes
5y
If the issue is simply the down payment, why not source that from friends/family if the deal still makes sense? If the larger issue is running out of money quickly and not being able to scale, consider equity or private money partners. That's a quick way to shortcut your growth. 50% of something is better than 100% of nothing.
If the issue is simply the down payment, why not source that from friends/family if the deal still makes sense? If the larger issue is running out of money quickly and not being able to scale, consider equity or private money partners. That's a quick way to shortcut your growth. 50% of something is better than 100% of nothing.
I’ve been hearing about getting money from family and friend for decades
Never came close to being able to do this myself not friends who look to buying real estate
Lender · Omaha, NE · Member since 2008 · 1k+ posts · 1k+ votes
5y
Michael, I am not 100% what you are saying in your response. But, I guess my point is, if you don't know anyone in your network that is a possible solution to your problem, then the problem is the size of your network. Definitely invest time in expanding it.
@Zac P. The house would be a student rental so BRRRR'ing wouldn't make a ton of sense here. @Todd Powell The seller does not own the property outright so we would not be able to do seller financing right? Is there another way?
Hi Grant, who else is involved in ownership? There's no reason that would prevent them from doing owner financing, you just need to convince more parties. My guess is you're probably right, as they may be looking for. a clean exit. I'd love to learn more about the deal. if you want to send me details.
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
5y
I had to make sure this was a thread from 5-10 years ago. Since it seems like it pops up at least every 3-4 months for the last decade. I wonder if those people are still on the sidelines or moved on to a new “hobby”.
Click on the magnifying glass in upper right and type in how to buy in today’s market
Check BP webinars
Next time don’t sell any properties you’re looking to get rid of, use an exchange, imagine what you would own today.
Use the great suggestions about house hacking above. Part of my original strategy was to buy a new primary every year for 5 years.
Investor · Atlanta, GA · Member since 2014 · 389 posts · 250 votes
5y
So Grant, what's the real question? Is your post a vent (and I hear ya'!) or an ask for solution ideas?
As long as I've been buying rentals as investments (never to live in myself) the downpayment has been 20%-25%, so this is not news. You must have been expecting owner-occupant percentages. Surprise!
1) is this property really a good deal? do the numbers work? or would it mostly be an emotionally satisfying purchase? This is the first thing you have to know for 100% sure
2) If you could come up with the downpayment, do you qualify for a conventional loan based on your own finances and the income from the property? will you have any reserves for CapEx, vacancy etc? Is the student rental of a kind that would qualify for conventional anyway?
3) how much money is 25% for this property? If it's a good deal and it will pay for itself as an investment, your stumbling block is coming up with that. Conventional loans don't like downpayment money to be borrowed, so you'll need a partner with money. Network with RE associations, ask relatives, etc.
4) you could try asset-based lenders, that care more about the value of the collateral than about your personal finances. They'll still probably want 25% down.
5) the owner knows you're interested and reached out to you, correct? Have you talked about owner financing? Put some money into an experienced RE attorney, and see if you can figure out some way to guarantee ownership, take over paying the current owner's payments and assume the ownership hassles, make some payments directly to the owner, and set a balloon-payment day a couple of years off, when you can refinance and afford to leave some of the cash in the deal. Once you already own the house, the "downpayment" can come from equity instead of actual money.
If the issue is simply the down payment, why not source that from friends/family if the deal still makes sense? If the larger issue is running out of money quickly and not being able to scale, consider equity or private money partners. That's a quick way to shortcut your growth. 50% of something is better than 100% of nothing.
I’ve been hearing about getting money from family and friend for decades
Never came close to being able to do this myself not friends who look to buying real estate
what am I missing?
You're missing the right family and friends, Michael. You broke the first rule of life: HAVE RICH PARENTS.
My take - Only at tax/foreclosure sales and auctions. Investors cannot compete with owner/occupants on MLS listings. You have to be willing to take smart risks and close with no friction to make a decent deal currently. By blind luck, I started in 2008 and for several years you could not make a bad deal if you tried. Not today.
I'm in the same boat, Terrell. While I did minor flips overseas and learned a lot of handyman game before the housing collapse, our first rental was in 2011, I think. Our way in was to get a home equity loan against our home for an amount that was embarrassingly easy to pay off every month with our combined income. Our first tenant didn't give us much trouble the first two years. I already knew enough to keep the place running. A monkey could really have made it work.
I recently have had the chance to buy a dream property of mine as an investment opportunity. This is a house I lived in while in college and I have had my eye on it every since. The owner recently reached out to me wanting to sell and I really want to buy. I have gotten the insurance quote but when I went to banks to begin the mortgage process I was shocked to find out that Down Payments for investment properties must be 20%-25% and most are on a 20-year loan. HOW IN THE HELL is anyone buying right now? What can I do here? I recently sold my last investment property because of distance and am eager to get back in it, but now it seems next to impossible. Im very very frustrated to say the least.
Buy with a 90% LTC Rehab Loan, work the numbers to get the loan right. Increase the value of the property and refinance out.
If the issue is simply the down payment, why not source that from friends/family if the deal still makes sense? If the larger issue is running out of money quickly and not being able to scale, consider equity or private money partners. That's a quick way to shortcut your growth. 50% of something is better than 100% of nothing.
I’ve been hearing about getting money from family and friend for decades
Never came close to being able to do this myself not friends who look to buying real estate
what am I missing?
You're missing the right family and friends, Michael. You broke the first rule of life: HAVE RICH PARENTS.
I AM available for adoption to loving rich parents
Rental Property Investor · Kansas City · Member since 2018 · 43 posts · 34 votes
5y
@Anna Watkins Thank you for the only sensible reply. This property is a great deal, the main reason I am so interested in it. The price is at 365,000 and it rents for $3600 a month. At a 5% down payment, I would be looking at 1200-1300 in profit a month. I have close to the amount needed for a 20% down payment but I don't want to throw my entire savings into the property and not be able to help the tenants if something is in need of repair. She still has a mortgage on the property so I will look into your suggestion on taking over payments.
Rental Property Investor · Fort Smith, AR · Member since 2020 · 53 posts · 48 votes
5y
@Grant Doyle
Find a good agent who invests in RE so they know what you're after. Closing my first two properties tomo. One we toured 45 mins after it went on the MLS. We made a full price offer right then and made it good for 12 hours so the felt a little pressure. The other was a pocket listing. Both met the 1% rule and will cash flow. This isn't the time to look for a deal and think about it for a few days. You need to know what you want and be ready to pounce. I live in CA and these are in Arkansas. Things are starting to cool there slightly, so the deals may get a little easier to find.