Hi All - I am in the midst of purchasing my first multifamily (4 units). My goal is to get to 40 units in 5 years. This first purchase will be done through FHA since I will be occupying the property. I then intend on refinancing after 18 months and getting another FHA. In between that time, I am hoping to purchase another multi-family (4 unit). I would likely have the cash to put 10% down but prefer not to put 20% down to increase my portfolio. Looking for ideas on financing.
A few ideas I have heard of:
Credit Card Balance Transfers - there are credit cards that have promotional periods of zero dollar balance transfers (just pay 3% up front) and can use that to leverage money for a down payment.
Heloc - I would need to wait 18 months until my first property has 20% equity in it to probably go this route.
That is honestly it. I am looking for 10% down or less ideas. Preferably with lowest interest rate possible but just hoping someone can offer guidance or suggestions on what to look at.
I also got started in real estate investing by buying a multifamily (triplex) with FHA. It's a fantastic way to get in with little money down. I also would like to refinance mine at some point and move elsewhere using another FHA loan. One drawback to FHA is that you can only have one FHA loan at a time, so if you want to build your portfolio more quickly than adding a new property every 2 years or so, you'll have to fork over 10, 20 or even 30 percent for a conventional loan. By the time you get to that point, everyone will know you're an investor so you might be able to find some private partners to help you with those larger down payments. :-)
There is a ton of info on BP about low-money-down options. Brandon Turner put out a book on the topic.
Learn all you can. Good luck!
Thanks, @Erin A. I actually listened to the audio book and it was very helpful. One lender has told me I can put down 10% on a multifamily that I am not living in (so pure investment) and interest rate is 4.5%. Have you heard anything about that? It is strange how some lenders are able to circumvent things based on how they are set up.
And more importantly, I was hoping to get a little feedback on a strategy to gather two properties in between those FHAs. My lender said I would be able to purchase another property with 20% down in between this FHA and the next FHA I take out in 16 months no problem. I will only have the cash to do that for one property, however. Are there any specific forums with specific strategies you might be able to refer me to. I have been through a lot of the general ways to purchase with little money down. I am not interested in a partnership, and do not have equity yet on a place to do a Heloc loan.
Wow, I can tell you've been thinking a lot about this! Very good.
With respect to lenders and mortgage brokers: Yes, they can all offer different terms and minimums based on 1) their company's underwriting standards, 2) whether or not they're going to hold the loan or re-sell it, etc. etc. There's some amount of variation, so you just have to keep calling around until you find someone who has a loan product with terms that will work for you.
Regarding other low-down methods: Though not super common, you may be able to find a property, put 10% of your own money down, get the owner to carry 10% of the loan, and then get a "regular" mortgage for the other 80%. Have you already come across this strategy? If not, it's called owner financing, seller financing, seller carry... do a search on the BP forums for it.
Why don't you want a partner? A partner is anyone who is helping you do what you want to do. If you want full control of the property and rights to all of the cash flow and appreciation, take on a partner who is going to loan you the other 10% you need for the 20% down payment, and pay them a fixed rate of return. I've heard of this type of arrangement, and it's usually 6% - 8% a year, interest-only paid monthly, with the principal repaid as a balloon payment in 3-5 years (ie: you refinance and pay them back). You can obviously change any of these details to suit the deal/partnership.
I was resistant to having a partner for a long time, until I learned 2 important things:
1. Would you rather have 50% of something or 100% of nothing?
2. Control of a property and its cash flows is dictated by the operating agreement you have with your partners, not by who puts how much money into the deal.
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