How to get first property

Question

I’m brand new to REI and was curious how some of you had gotten your first multi family property. I have great credit, have owned my own construction company for a few years (landscape), and am in the process of getting my builders license.  I have a couple good potential duplexes available but since I cannot buy them cash did most of you go conventional loan on your first property?  Thanks for any advice. I own my own home right now as well.

Simon Stahl · Answer

I bought my first Tri-plex cash with a HELOC from my primary residence. I did so because it was not fully rented out and needed some rehab work done. Cash offers are also more competitive than offers with conventional financing. You can get a loan on it later on.

I would take some time and talk to different banks. I found that it is much harder to get a loan with good terms under an LLC. I did find a few banks though that told me they don't mind if I move the property into an LLC after I got a conventional loan with them. Just talk to some and see what options you have.

Quito Keutla · Answer

@Andrew Everingham I started out with a single family, and after a six single family, I went into duplexes and than to fourplex. Now I want to get into apartments.

Andrew Everingham · Answer

@Greg Dickerson. Thanks for the info Greg I really do appreciate it.

Greg Dickerson · Answer

Andrew,

You can’t transfer the the property to an LLC after you close. The lender will not allow it as you will trigger a technical default.

A commercial bank will lend you money for the property if it’s in a new LLC. You will be the qualifier and guarantor. You may need to find the right bank as not all will do investment properties but most small banks do.

Andrew Everingham · Answer

@Quito Keutla. Thanks Quito!  Did you start right away with multi family?  It seems a little more promising to at least try a duplex instead of single family.

Andrew Everingham · Answer

@Daniel Weber. Thanks Daniel. I had heard smaller local banks were easier to use than larger banks. More REI friendly?  Is that what you’ve experienced?

Andrew Everingham · Answer

@Greg Dickerson. Thanks Greg!  Did you start an LLC before your first purchase. Just wasn’t sure they would approve a new llc for the loan or if I would just get it personally and then transfer it to the llc.

Todd Nurnberger · Answer

@Andrew Everingham  Another option that we used to get started was to get a HELOC for the equity in our home.  We did this as a way to be "cash" buyer and access deals in the competitive San Antonio market.  Then you can do a conventional "cash out" Refi or use the delayed financing provision to avoid the  "seasoning" required for a "cash out" refi.  This is basically the BRRRR process that hopefully allows you to get you HELOC funds back and gives you "cash" for your next deal.  This only works if you have sufficient equity in your home to pull a HELOC big enough to invest with, but it can be an option that works well for some investors.

Nick Brown · Answer

Definitely conventional loan. Conventional loans offer great rates for smaller properties, As a business owner, they'll probably look at your last 2 years income and average it.

Quito Keutla · Answer

@Andrew Everingham Sounds like you should be fine getting loan through your local bank as long as you show income on your returns like @Daniel Weber mention.  For my first duplex I went convention. Happy Investing!