I have found the first property Id like to purchase. Relatively low dollar, but good shape, good track record of renting. I was thinking of just a conventional mortgage for financing as I don't have a lot of cash for a downpayment. I have a good income and credit rating, just not much cash right now. I'd like to do 5 or 10% down. Is this realistic?
The only way you're going to get 5-10% down for an investment is some sort of creative financing. If you go to get a conventional loan you should plan on 20% down. I've heard of 15% down, but that's going to require PMI and that will hurt your cash flow.
So, first possibility is seller financing. Not a seller second, which a conventional lender isn't going to allow, but full seller financing. Have you inquired about that? Unlikely to be the 30 year fixed rate you would probably like, but might be a way to get it without 20% down.
Or a loan on some other asset. Trouble there is conventional lenders want the down payment to be your cash and will ask if part of the down payment is borrowed. So, discuss this up front with your broker or lender and see if there's a way to do this.
A last resort might be hard money. For the right deal, with the right HML it is possible to get in with a lower down payment, then refinance after doing some work. But that requires a HML that doesn't have a large down payment requirement and a property that you can force some value into. And this is an expensive approach.
Jon Holdman, Flying Phoenix LLC
A few other ideas.
When you are broke but have good income, consider:
1. Partnering for the down payment, create a promissory note at a reasonable rate as in 7 - 10%, no prepayment penalty. Pay off the loan ASAP. Create an LLC and have both investors with a buy out clause.
2. Read up on syndications. Ex is http://www.biggerpockets.com/renewsblog/2014/02/18...
Books are http://www.amazon.com/s/ref=sr_st_relevancerank?ke...
3. Remember, IF you find the great deals, THEN you can always find the money. Try on BP for cash and credit partners!
"I'd like to do 5 or 10% down. Is this realistic?"
If it is a 1-4 family and you intend to occupy one of the units, this shouldn't be a problem if you have good credit and income. After a year, you can rinse and repeat with another property.
If you do not intend to occupy the property, it is more difficult and the loan terms (rate, down payment. points, etc.) are likely to be less favorable.
Thank you all for contributing to this thread, I appreciate it. I have tapped another source of income and wont go to Starbucks for a month!
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