Financing question

6 Replies

Hello investors hopefully someone can help me with this.  My question is when it comes to getting financed for a second property. If I have one property and it's producing a positive cash flow after mortgage and expenses etc how do I get financing for another one.  Say I have the cash to put 20% down on a second property.  Will the first property show as debt and hurt me from getting a second mortgage ?  I want to know how investors are able to buy multiple properties.  I have the down payments but confused how you will get multiple loans and leverage to buy with bank finances 

Originally posted by @Joseph Tarallo :

Hello investors hopefully someone can help me with this.  My question is when it comes to getting financed for a second property. If I have one property and it's producing a positive cash flow after mortgage and expenses etc how do I get financing for another one.  Say I have the cash to put 20% down on a second property.  Will the first property show as debt and hurt me from getting a second mortgage ?  I want to know how investors are able to buy multiple properties.  I have the down payments but confused how you will get multiple loans and leverage to buy with bank finances 

 The banks base residential mortgage loans on your income and credit score. Many banks will not look at any rental income until you have two years of tax returns showing the rental income. So when you are starting out, it may be based solely upon your W-2 income. 

Also many banks require that you have 6 months of emergency reserves (PITI or principle, interest, taxes, and insurance) for each property you own, outside of your down payment and closing costs. On top of that the banks also want you to have two months of PITI for the property you plan on purchasing.

I own two properties that I financed through a large bank, and all of those things were required, plus they were unable to count the rental income from either property because I did not have the two years of tax returns. Fortunately my W-2 job pays enough to allow me to qualify for having that amount in loans. I didn't get so lucky on property number three, and went the owner financing route instead. 

It is easier if you can manage to get 1-2 properties free and clear. Then you combine assets (rental income, money saved from working, etc) with a cash-out refinance of one of the clear houses to buy the next house clear. Rinse and repeat. 

How do you get the first house free and clear? Well, if you have equity in the house you live in, that's one way. Saving a big chunk of money from working. Find a private investor willing to lend you cash. Getting started is the hard part, and if you haven't been in the game long it will be difficult to find banks willing to continue to finance as you will be highly leveraged without much cushion. 

Investors buy multiple houses by building systems. 

One person systems might be to get hard money loans to buy, fix up houses, refinance and then rent. Another persons strategy might be to use the FHA to buy multifamilies and repeat every year. Another might just pool money from other investors to complete commercial purchases.

Ultimately success in investing is repeating the same strategy or strategies over.

If it's cash flowing, you might actually have that income count towards your buying power for qualifying for loans. 

A lot of starting investors don't own their house free and clear. The main exceptions would be people that inherited or bought the houses extremely cheap.

There are a lot of ways you can acquire that next property. 

A few are:

1. Conventional loans

2. FHA loans

3. Seller Finance

4. Use Home equity loan

5. Commercial loans

I suggest reading the book called "The Book on Investing In Real Estate with No (and Low) Money Down". It's really good and opens up alot of options you may not have thought.

Banks aren't going to give tha, or conventional loans every year I don't think that's the problem. Even if the property is cash flowing you still have a mortgage.. If it's not paid off the banks aren't going to keep giving mortgages to buy more property. @Alberto De jesus

@Joseph Tarallo

Creative Financing has to do with acquiring properties with

  • Sub2
  • Lease Purchase and Lease Options
  • Land Contracts
  • Wrap Around Mortgages
  • Contracts for Sale
  • Private 1st Mortgages - Private IRA Loans
  • Installment Sale Purchases on Free and Clear Houses

You can make money for solving problems for home sellers using

  • Joint Ventures with Home Sellers
  • Lease Option Assignments

Don't Be a One Trick Pony

Be a Transaction Engineer

@Joseph Tarallo Sorry, maybe I missed something. Is the question, "Can someone get another mortgage even though they owe on another mortgage?" 

I would say the answer is, "Yes, if they are in strong financial position and have a good relationship with a bank". I owe 200k on one property and already approved for another 400k loan for buying another property with a bank. 

Now this assumes that a person has a good credit score, been in the same profession for a while, makes enough money, and their debt is not too much.

If that's not the question, what was the question?

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