best way to fund the 20% on a multi family?

Question

i havent worked at my job for 6 months yet.

My plan initially was to purchase a 4 family with an fha loan, but then i moved and switched jobs so now i need to wait 6 months again and dont qualify for a residential loan.

so now im trying to figure out the best way to purchase a 5 unit multi and find a way to fund the 20% down

Upen Patel · Answer

Account Closed Why do you need to wait for 6 months again? Seems like an internal overlay of the lender you are working with. If you recently graduated, then there is no work history required. If you have been working, then you just need to show 2 yr of continues work history. You don't have to be at the current job of 6 months.

If you have the 3.5% saved up for a FHA, then you just need to switch to a lender that doesn't have crazy internal overlays.

Brent Coombs · Answer

Account Closed, I recommend: patience.

Whatever happened to: keep saving while waiting to qualify for a loan?

Why give up on the idea of a low 3.5% deposit for an owner-occupied four unit? I reckon you'll get there a lot quicker than saving up 20% for a five unit.

If you're worried that if you don't get in now, it'll be more expensive to get in later, then you could be likely to make a poor/panicky purchase decision, even if you find your desired "creative" financing idea. I suggest: use the extra time you might need to wait while saving, to find out what makes a real "deal", so that when you do qualify, you'll also be wise! All the best...

Todd Dexheimer · Answer

Account Closed

One thing I don't see mentioned is that you will need more than 20% of the PP. There will be closing expenses, lending fees and you should also start out with a reserve account of around 6-9 months of the monthly loan payment.

A few things to try would be:

Get the seller to carry back 10% of the down payment. You will need to find a bank that will work with this as well.

Get the seller to finance the deal. You can try for 0-10% down. It will be hard, if not impossible to get a seller to go with this unless they get closer to 10% down.

Find a partner. Network here and at your real estate meet ups.

Account Closed · Answer

@Hadar Orkibi No i dont own another property and i wouldnt be able to get a hloc from my parents. They would find that too risky since theyve worked so long to get the equiity in their house.

Are there banks that will lend 20% in second position? or is finding a partner a reasonable idea?

Ryan Evans · Answer

If it's an occupied fourplex and the numbers work, you can find a commercial style loan that will go off the numbers and not your income. You'll still probably need to guarantee it, but might be an option for you. That doesn't get you the down payment, but that could probably be handled through taking on a partner or two. I'm working on a partnership for my next deal.

Give podcast 175 a listen if you want to hear a good story about using partnerships to buy multifamily.

Omar Khan · Answer

@Ray Harrell I will second @Brent Coombs and @Upen Patel comments.

It sounds like you would be better served waiting and saving. This way you will be well-capitalized and will not take hasty decisions. Unlike owning public securities which you can sell at a click of a button, buying real-estate is a long-term decision. Hence, it pays to wait.

From my understanding, you do not have to work at a job for 6 months to qualify. For most lenders, you are good as long as you can show 2 years of continuous work history.

Nonetheless, do not focus on only the FHA loans. In our market (DFW), currently there are enough conventional financing products that are equal or better in terms to FHA. Do your homework and talk to multiple mortgage brokers and lenders in your local market.

Ray Harrell · Answer

@Hadar Orkibi, even if the seller leaves some money in it, the buyer still has to show seasoned funds of his own. Otherwise it's just too risky.

@Jay Helms, some family members just are risk averse, especially those who worked very hard to get what they have. I have a friend who won't invest $10 in an Ipass because he feels that's $10 sitting somewhere not being used. So he pays full price for tolls. Some people won't even risk asking questions. One of my tenants is paying $1,400 a month rent for a 4bd/1ba. I suggested she look into buying a house in that same neighborhood and pay about $700 a month. She couldn't fathom the idea of buying a house.

It could actually be a GREAT deal, but if someone thinks they will lose even $100, they won't do it. Not all of us were born into Trump or Romney type families.

Ola Dantis · Answer

Account Closed Hey Jeff, remember you can start with a two-unit or 3-unit if that is what you have the capital for right now.

Remember, it is not about how we start but how we finish! Marathon not sprint.

As for the job piece, you need two years of continued work history.

To conclude, why the rush? Take your time to gather some capital while you are learning more. Refrain from jumping into a deal just because you want something to happen now, as that could lead to getting a bad deal.

You might be pleasantly surprised to find more interesting tricks as you learn more about real estate investing and multifamily.

Hope this helps, Jeff. Goodluck. Thanks! - Ola

Jay Helms · Answer

What did your friends/family not like about the deal when you proposed it to them? Can you change up the structure so they’ll jump on board and fund the 20%?

Hadar Orkibi · Answer

more details required to answer and suggest Account Closed

Do you own another property?

Can you get a line of credi HLOC on your or family members property? Even if it’s temporary.

Ask seller to leave some money in?

best way to fund the 20% on a multi family?

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