How is anyone buying investment properties right now?

65 Replies

@Grant Doyle

You can still do owner finance but it would be a WRAP Mortgage. If you google can find more info but basically, the first loan stays in place and the owner will have his difference from the amount he owes minus the price he sold to you in a second position loan. However, find out if the bank holding the first will be okay with that as some smaller banks can trigger the due on sale clause if you change the name on the deed. 

Another option would be to first get it appraised to ensure you are not paying more than it is worth. Then you can refi and have the first loan paid off and possibly the seller's note if you bought right. 

Best of Luck 

Hey Grant, what town is it in?  I've got some college rentals too, and have some creative ways to finance. DM me if interested in brainstorming together.  If it's a good cash flow opportunity, I bet you can figure it out.  More than happy to share resources if you need some. Bryce

Originally posted by @Paul Kubin :

@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.

How about posting your proforma cash flow on the MLS full price buy. I've not seen the #s work on one of those work for 3+ years. Especially not at 1%. Share the MLS listing as well.

Most of my clients buy owner occupant 3.5%-5% down. You don't have to live there long. Technically 1 year but most lenders will OK buying another in 6 months if have a good reason. Great way to get in low down. 

My clients who do 25% down tend to be using HELOCS from their first property, etc. or are older with sufficient funds. 25% down can work great too once have the capital. Especially on nice 4 units where when you raise the rents it X increase times 4 and can really create nice numbers.

This is so market dependent, and I love buying on MLS right now in KS. Is 3.6K rent normal for the area that you invest in or is this a luxury property? The "1%" rule work even better on 3.6K on 365K house than on 1K on 100K house because a lot of your expenses grow log(house price) if you know what I mean... I make 5-10 offers a week and close 1-3 houses a month on MLS, it is totally possible, but you probably have to pay cash and offer 2 week closing, and the houses that take my offers are typically not ones owner home buyers are looking for, so look for deals that make your numbers work. I can usually BRRRR with putting in 15% down on a 75% LTV so I make 10-15% ish equity and that's all I'm looking for. Repeat 15 times a year that's 150-200K sweat equity annually which is pretty good for my level of commitment OOS. By my underwriting on a 20 year portfolio loan, each new acquisition loses 1-1.5K a year including capex on year 1, but this is unlikely because I've have replaced most stuff on y1, and by year 4-5 it will break even, if I'm lucky rent growth should make break even earlier. Just hold reserve and you should be ok. Don't worry about cash flow, we're in an inflationary market, you don't want to be holding cash.

One of the greatest wealth generator is inflation leverage. If wage goes up 5% and housing 5%, then economist will think that's reasonable, but if you're 4x leveraged on a house on a fixed rate mortgage, then you've made 20% on appreciation that year and blowing past the savers :)

If we think that buyers are nuts, we have limiting beliefs and are wrong.  Are there crazy buyers not doing proper research?  Sure.  Are there investors with active deal flow pipelines making major profits?  Absolutely.  Amateurs talk while the pros make money.  Go pro.

I thought this post was going to be about the high prices.  In terms of financing, 20% down on an investment loan is going to be the bet you're going to do.  Many banks want higher.

Good news:  Lots of folks are lending right now.  Shop around.

I've just refinanced a few properties at very low interest rates.  Very unusual:  We are in a period of inflation yet the interest rates are low.  The debt level on my properties are naturally going down faster this year.

1031 exchange to take advantage of high sales prices and to give yourself ample cash for the next down payment (and then hopefully refi cash back out)?  We're in the middle of one right now and the timing seems superb!

Originally posted by @Brian Ploszay :

I thought this post was going to be about the high prices.  In terms of financing, 20% down on an investment loan is going to be the bet you're going to do.  Many banks want higher.

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Me too, Brian.  Buying  strategies in this sellers market would be a worthwhile discussion. 

 Help me analyze this deal and oh what do you mean investment loans require 20%+ down should have sunk to to the abyss right away.