I’m extremely new to all of this but have been reading and listening to everything I can get my hands on the past 6 months.
I’m looking at getting my first multi unit deal but am struggling in getting started as I have quit a few student loans attached to my name. I’m in an area that is growing (Des Moines Iowa) with several college campuses and growing developments.
I’ve been assessing deals and looking at several units but I’m having trouble with the financial aspects.
Has anyone delt with this issue or have any experience with student loans and having issues getting started? Any advise would be great.
I’m in the DSM market right now and it’s pretty hot. There are deals out there but they’re getting harder to find. I would look for a local lender like a credit union and see what their recommendations are with your loans. A lot of them will look past the student debt if the deal is good.
Welcome Mitchell! It's always nice to see someone local and I would suggest that you come to the next local meet-up, which you can find on the events page here (and it starts at 5pm). Are you looking at SFH, duplexes, >5 units, or something else?
When you say that you are having problems with the financial aspects, do you mean: Finding a deal that makes sense? That you have problems with the calculations? Or that you are finding it difficult to compute with your financial resources? As you don't mention what sort of down payment you may have as well as what sort of cash flow you would have (either from the job or from properties).
As the local market is pretty hot on multi-family (>5 units) properties and most listed properties have low cap rates, are older with deferred maintenance, and sometimes both. If it is 1-4 units, you could try house hacking or BRRR.
As there are ways to get around lack of downpayment, but it isn't easy to do. Such ways would include partnering with someone with money, using a private lender, or seller financing. However, it isn't necessarily easy to find any of these, which is why I would suggest building your network and talking to people (as you never know what you can find).
Hi Mitchell! Tell us more about what struggles you are having! @Dave Peirce had some great questions.
I understand some of the seasoned investors are struggling to find deals at a pace that matches 2010-2015 years, but deals are still out there today especially over the winter months.
Regarding financing, in addition to Dave's question, how many banks have told you no?
Hey @Mitchell Smith
I have a few lenders that work well with new investors. Your student loans will make a difference, however with the right lender, it will be small.
@Matt DeBoth awesome thank you!
@Dave Peirce Hi Dave that would be great to meet at the next meeting! I’m basically running into the fact that my student loans are making my debt to income ratio to high. I currently own my house which besides student loans and my mortgage is all the debt I have. I make pretty good money for the area and rent out 2 bedrooms in my current house which helps pay most of my mortgage currently.
I’m just looking for maybe a duplex or Quad to start that already has tenants. Most banks I’ve looked at in the area with my lender want to see 20% down which I don’t have currently.
I’m super motivated to get started just want to make sure I have things lined up. Ideally I’d like to learn from someone with a lot of experience that I can help make money and in turn learn from and gain some more knowledge as I’m just starting.
Well currently I’m just being told my debt to income ratio is too high due to student loans. I’ve been working with a broker and we keep running into the same problems plus they are more than likely going to want 20% down which I do not currently have. I make a decent income for the area as I run the state of Iowa’s Medicaid housing department so have some knowledge in the area of housing just not much in real estate quit yet.
I would love to learn from everyone on here and bring value to someone’s portfolio. This is all new so just thought I would throw myself out there to the wolves lol.
@Mitchell Smith mad props to you for putting yourself out there! IMO, the fact that, the only debt you have is mortgage and student loans is a great thing.
Sounds like you have the "more time than money" scenario.
I'd challenge you to get 3 meetings per week with real estate professionals (agents, contractors, flippers, brokers) share your story/plans and you'll more clearly define your next steps.
Also, i may be wrong, but 20% down would only be required if you didn't plan to live in the property. An unit with 4 or less doors typically can be bought with a residential loan, which depending on the lender, you should be able to get a lower down payment more like 5%.
As long as your current house will cashflow as a rental, house hacking into a duplex or Quad may be your next step.
If all the mortgage brokers are telling you that you need 20% down, I would follow @Matt DeBoth 's recommendation and go call every credit union and small bank around rural Iowa and have a meeting with them, explain your situation, I bet you'll be surprised what you'll learn.
Also, shoot me a message, I'd love to be one of your coffee meetings! :)
@Mitchell Smith don't let student loans hold you back. Don't use that as a crutch. Go to seminars and workshops where other operators will be present. Network with these folks and see if there's any way you can add value to them. What are your strengths? Cultivating relationships with operators can only be beneficial for your growth. This will help accelerate your progression towards doing your first deal. Good luck
Will the cash flow of the property support the debt? At what ratio? Meaning income divided by debt. Higher you get past 1.0!the better
@Darson Grantham what type of bank is offering mortgages at 5% down? I'd like to know more about this.
I haven't found a regional bank, community bank, or credit union offering anything less than 20% down on residential loans. Plus, some of them want to treat any investment property as a commercial loan if it has 2 units or more. It's frustrating.
@Ron Rohrssen sorry if I wasn't clear, the 5% down is only for a personal residence. Brad Parker BankIowa
Ah. Thanks for clarifying @Darson Grantham .