Rental Property Investor · Buffalo, NY · Member since 2019 · 43 posts · 9 votes
I’m young, I’m only 18 but I want to get started with investing into multi-families.
One of my main concerns is the loan, I don’t have any knowledge on loans. I have a few questions, so please if you know anything about these loans and the terms of them please reply.
- do you need a credit score ? If so what’s the typical range you recommend..
- Is this loan going to be the amount of the unit I choose? As like if I were to be buying it..
- what’s the recommended % I put down on the loan?
Real Estate Agent · Winter haven, FL · Member since 2011 · 572 posts · 336 votes
6y
FHA basics
minimum 580 credit score
2 years of stable employment history
43% DTC(Debt-to-income) Ratio - your monthly debt may not exceed 43% of your monthly income
required downpayment 3.5% of purchase price
75% of annual gross cashflow can be claimed as annual income.
payment includes Principal, interest, taxes, insurance & PMI
There are so many variables but that is simply the basics of the FHA Loan. There is also a FHA 203(k) loan that is the exact same except they loan you money for the renovation as well. I hope that helps
Real Estate Broker · Member since 2018 · 6 posts · 7 votes
6y
Hey Joe. 1st congrats on making the decision to get started at an early age. You will hear this a lot as you learn about Multifamily but if you are looking to be a General Partner and syndicate an apartment acquisition you will need a team because this is a team sport. No different on the lender side of this road block. You should network and look for a loan sponsor who has credibility and experience. I’m sure many others will have some good advice on how to take your next steps but just start networking and building your team. And as always continue educating yourself and learning. Best investment of your time is to keep learning. Good luck. You got this.
Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
6y
If you go FHA to house hack they can loan as low as 580 but the interest is high. I'd recommend 620+ credit score. FHA is an owner occupant loan so interest is in the 3's. If you don't live in it and do a conventional loan credit would need to be 640 from what I've seen but possibly lower. I am not understanding your second question. The loan will cover the total purchase price minus down payment(Example-duplex is 100K loan would be for 80K if you had a 80% LTV). The minimum for FHA loan is 3.5%, if you did a conventional loan 15% is the minimum but you can put down more. I'd put down 15%-20%. Hope this helps.
Rental Property Investor · Indianapolis, IN · Member since 2018 · 67 posts · 48 votes
6y
Congrats on deciding to take the first steps toward RE investing. I'm in my 2nd year of investing so I still feel a little weird giving advice as if I'm some kind of "guru".
I'll just answer your question from my experience with my first rental. If you go with a big bank or credit union, yes, you'll need a credit score. I was approved for a 203K loan with a 660 score. My broker said I could have been as low as 610, but my APR would've been higher.
If you're going FHA, you'll need to put down at least 3.5% and the bank will finance the remaining 96.5%. If you happen to be in the armed forces, you can qualify for 0% down if you have the credit requirements.
BP is a great tool, but the best first step you can take is contacting a lender and getting pre-approved. Trust me, they'll be more than happy to tell you how exactly they can give you a loan. Good luck.
Rental Property Investor · Buffalo, NY · Member since 2019 · 43 posts · 9 votes
6y
@Dan Barentine
Thank you! I appreciate that a lot. I will start networking, although I’m not sure as to how in real estate to find people who will partner with someone at such a young age, I don’t have much funds so I don’t have the opportunity to do big projects. I feel like loan sponsors would only work with big time players.
How do I find loan sponsors? And what actually is a loan sponsor? How do those work? If you don’t mind answering..
And thank you again for the advice and I’ll put to use it right away.
Thank you! I appreciate that a lot. I will start networking, although I’m not sure as to how in real estate to find people who will partner with someone at such a young age, I don’t have much funds so I don’t have the opportunity to do big projects. I feel like loan sponsors would only work with big time players.
How do I find loan sponsors? And what actually is a loan sponsor? How do those work? If you don’t mind answering..
And thank you again for the advice and I’ll put to use it right away.
My $0.02 would be to attend meetups and networking events in your area to try and find like-minded people. My guess is you'll find a few pretty quickly who are the right people, or could point you in the right direction
New to Real Estate · Columbus, OH · Member since 2018 · 41 posts · 30 votes
6y
Its awesome you're getting started so early. My advice is to never stop learning, and don't let the fear of mistakes stop you from taking action. Remember there are lessons to be had from both success and failure, so you can learn something from pretty much everyone. Personally, I spent far too long not taking any action because I hoped to eliminate as much risk as possible.
Real Estate Agent · Winter haven, FL · Member since 2011 · 572 posts · 336 votes
6y
FHA basics
minimum 580 credit score
2 years of stable employment history
43% DTC(Debt-to-income) Ratio - your monthly debt may not exceed 43% of your monthly income
required downpayment 3.5% of purchase price
75% of annual gross cashflow can be claimed as annual income.
payment includes Principal, interest, taxes, insurance & PMI
There are so many variables but that is simply the basics of the FHA Loan. There is also a FHA 203(k) loan that is the exact same except they loan you money for the renovation as well. I hope that helps
Rental Property Investor · Buffalo, NY · Member since 2019 · 43 posts · 9 votes
6y
@Caleb Brown
Thank you Caleb! Great information and I definitely understand more, my second question was a bit weird the way it was worded, but you got it and made me understand the amounts. I will work on getting more money for the down payment.
Rental Property Investor · Buffalo, NY · Member since 2019 · 43 posts · 9 votes
6y
@Ryan Freet
Thank you Ryan! It’s amazing how kuch I’ve already learned from BP. And from people like you who give advice that I will forever have and put to use. I’m looking at 3-4 units in my area and surrounding and so far have seen some really good deals.
Looking into finding some people on here to connect with to share information on the units to see if it’s the correct route to take.
Rental Property Investor · Buffalo, NY · Member since 2019 · 43 posts · 9 votes
6y
@Manny Cirino
That helps a ton Manny! Thank you so much, it’s a lot of variables I can see but either way it’s a start! I’m gonna look more into them as I’m researching properties and do the numbers..
Lender · Chicago, IL · Member since 2016 · 653 posts · 313 votes
6y
- do you need a credit score ? If so what’s the typical range you recommend. 620+
- Is this loan going to be the amount of the unit I choose? Don't really understand this question, but it will depend on the purchase price as FHA finances up to 96.5% of the total purchase price. The remaining 3.50% is known as your down payment
- what's the recommended % I put down on the loan? FHA has 3.50% down payment. If buying through a conventional loan (which aren't insured by the US govt in case of borrower default), then expect to put 20-30% down.
I fund commercial real estate and multifamily nationwide, so I'm familiar with most lending criteria and considerations.
Rental Property Investor · Buffalo, NY · Member since 2019 · 59 posts · 36 votes
6y
@Joe Aquilina
Hi Joe, I am living in buffalo as well. The multi family properties are extremely hot right now, properties selling at prices that make it difficult to cash flow every month. Many ones that are move-in ready range in the 130k-160k range.
My recommendation is to work with a local bank, see if they offer any first time home buyer programs (Empower FCU does but takes 2 years to qualify). They will also let you know how much you qualify for, based on your income from your job.
Rental Property Investor · Buffalo, NY · Member since 2019 · 43 posts · 9 votes
6y
@Alex Leana
It is HOT!! I have seen so many multi units going for dirt cheap... even with a 130k value the rents are going for maximum 700 for ALL units... (3 unit multi family) it’s great don’t get me wrong, but I don’t have the money to rehab and make the cash flow even greater..
Not too mention there are already tenants in practically every single multi family..
Rental Property Investor · Buffalo, NY · Member since 2019 · 59 posts · 36 votes
6y
@Joe Aquilina yeah it's tough to make a property cash flow in buffalo's market right now. Message me if you would like to talk further about buffalo REI.
Rental Property Investor · Buffalo, NY · Member since 2017 · 56 posts · 21 votes
6y
Joe - if you want to house-hack you don't necessarily need a multi-family building to do so. My first place was a single family house with 4 other roommates. Rent by the room and split utilities. If you have a bunch of friends you would want to live with that would be the best way to start. Additionally, if you aren't private and don't mind a strange person in your house from time to time you can Airbnb a room in your house as well. We rented 1 of our rooms in college as a short term rental before Airbnb was even a thing.
As mentioned, the multi-family units in Buffalo are stupid expensive right now and there is a lot of competition. It seems like everyone started reading Biggerpockets and decided to buy one at the same time and now there are not many nice ones left (plenty of dumps in the ghetto though) so when a nice one becomes available it goes quick and often for cash. However there are tons of single family houses available and you will get better bang for your buck, lower down payment and financing costs, and potentially better resale since 99% of the market buys SFR.
Don't rule out a nice 4-6 bedroom house because it's not a duplex. Just another option for you if you aren't having any luck with multi's!
Don't give up on acquiring a Multifamily 3-4 unit in a hot Market! You just have to tweek your way around once you got that down payment. Listsource.com provides you the addresses and names of all the Multifamily properties in the Area of interest. Once you have that information send the owner a personalized letter. Let them know your age and your dream of wanting to become like them on buying your Multifamily and to please call you when they are ready to sell. This makes you their first option when selling. Sometimes they will consider a couple of thousands less just because they emphasized with you... This will take time but definitely worth doing when Market is HOT.
If this was a golden nuggets for you I will appreciate a vote. Votes are similar to "likes" on Facebook. When someone agrees or likes what you write, they will "vote" on your post.
You have to click on the votes tab number and it will add your vote. Wish you the best!
Rental Property Investor · Philadelphia, PA · Member since 2020 · 30 posts · 17 votes
6y
One tip I have for credit building while you work on saving money, is to get a credit card if you have not yet. Particularly one with no annual fee and some sort of cash back offer is often advantageous. ONLY use less than 30% of your credit limit, and preferably, less than 10%. Meaning use this card only as a tool to start inching up your credit score (use it only for paying gas for your car, or just set yourself a limit to use per month). Although I had some student loans in my credit report, I didn't start paying them back until last month, so they didn't do much for raising my credit score. But as soon as I opened a credit card account, my score went up 42 points JUST from diversifying what kind of lines of credit I had, as I was just a student with no real credit history. Continue to strengthen your credit and when you go to get a loan there will be an advantage on rates.
Work on your budgeting and get in the habit now of saving aggressively. The money will pile up quicker than you think and you will have down payment money