I've decided if I buy a 3-4 family that I really don't want to live in it. Mostly I don't want to find one my girlfriend will be happy living in, getting something nice enough to make the both of us happy means we'll limit ourselves quite a bit in where we can buy a house. Also, we have large fish tanks.....I don't want to move them until we are ready to buy a house that we'll be in for a good while. I'd rather just buy a house that will be an investment (purely to generate income) and stay living where I am until I can purchase a home for myself. Can anyone recommend a 80/20 lender that will finanace me if I am not planning to live in the house being bought? Obviously I'd be buying something that generates enough cash to cover expenses plus a profit and money to cover any problems along the way. Would rather use a conventional lender, too nervous about lease and subject to options. If you are a lender, know a good lender or have some money you want to let me borrow send me a PM. Need a lender licensed in CT that can finance $150-300k.
In case you were wondering....
Credit rating currently around 675, should be at 700 soon. (g/f co-signing, her is about the same)
Combined income of $65,000+/yr
Rich, did you find a lender?
I got a few suggestions but if you have someone you like please mention them. I'd love to be able to sift through and pick the best rather than only have a few to choose from.
Here's some suggestions to consider when looking for a professional to work with.
Finding the right mortgage consultant for your investments will be important for the growth of your business. Once you have found a professional whom you feel comfortable with he will need to pull credit to review over scores and tradelines. There may be a few short forms to complete as well so that he can intelligently discuss loan options with you. A credit check should not be needed again until another property is ready to be financed. (As a side note, when your credit is pulled by a mortgage broker or auto lender, the bureaus treat up to 15 hits within a 30 day period as one.) The consultant should be asking questions about your short and long term goals so that the appropriate mortgage terms can be matched to the subject property.
There are many lenders a broker can use and most of them offer the same programs. A handful will even allow 100% financing for 1-4 units. However the guidelines may be slightly different at each. Some of the key points lenders will consider are listed below.
1. How many properties are currently financed?
2. How many properties have been purchased in the past 6 months; in the past 24 months?
3. Does the borrower have landlord experience?
4. Will the subject property have a negative cash flow?
5. If the borrower doesn't show enough income he may need to go stated, no ratio, or no doc
6. Usually a borrower will need 6 months of reserves. (6 months of principal/interest/taxes/insurance) If multiple properties are being financed, reserves for all may be required. This could also apply for properties purchased in the past 6 months. If funds are not available the borrower may need to go stated or no doc.
7. Will the client need cash out refinances with no title seasoning?
8. Will the client need rehab loans that cover 100% of the purchase + fix?
The variation of these is why long term goals need to be addressed. Certain lenders will need to be used first as their property restrictions will prevent financing. The lenders that allow unlimited properties usually have higher rates and should be used as the portfolio grows. In some cases, as the equity increases, investors will use a local bank to obtain a blanket refinance loan in the name of an LLC.
Speaking of an LLC, it will be important for you to be teamed up with other professionals who can give tax advice and estate planning advice. Your mortgage consultant can work hand and hand with them as well.
A great mortgage consultant should also be able to provide answers on how to qualify for 100% rehab financing. They should also be able to explain how lenders can approve 90% cash out refinances with no seasoning of title. This will be valuable if you complete a rehab or have purchased a property well below market value.
So far this only address the knowledge your consultant must have. Don’t forget about service. This includes communication with you and the real estate agents involved. Every transaction goes through the same process. Within this process there are some key events which can be updated to everyone. Part of service also includes helping you manage the terms on your portfolio. A professional should be aware of how mortgage backed securities affect interest rates and have an opinion on what direction the market is heading. As your consultant he can notify you periodically of new loan products or lower rates.
I hope this has helped give you an idea of the service that real estate investors are entitled to.
Not sure if you've already found someone, but my wife is a loan officer working for a mortgage banker, not broker, Residential Home Funding, in Ridgefield, CT. She was working out of Westport for the past year but the profit out of the new office is outstanding.
Her name is Sara, and anyone interested in CT. loans can call 203-981-9260.
Take Care, and I hope it works out for you.
Can I play Devils Advocate for a minute??
If you can show me a 4 plex that you can purchase with 100% financing, that CASH FLOWS I will buy 10 tomorrow.
Not to be rude but, My experiance is that 100% financing, non-owner occupied rates are so high that cash flow is but a memory.
Check out Fannie Mae Desktop Underwriter guidelines for what they're looking for because that's all the lenders are doing -- selling to Fannie Mae and Freddie Mac. I had terrible times with my triplex and a duplex with a cottage detached in the back yard (with it's own lot); both considered unconventional. That's 80/20 LTV because who can pay PMI? Cross collateralization is the only way I know to buy anything with no money down. Also, living in the multi helps the lender feel better about the property. Of course, you lose owner unit writeoffs if you do that including that portion of depreciation.
The points ffrom my lender changed from 1 to 21/2 the day of closing by because the loan officer claimed it showed up "flagged". Lenders don't like multi like tris and quads because they know they're harder to get rid of and they are...because Catch 22 they're harder to finance.
Don't forget insurance.. Anything over 2 units, State Farm sees in a different category in your rental package. When buying older properties, make your first call to your insurance agent before you offer and close the deal. And never lie about number of claims to any of them. They don't hesitate to drop you in a minute.
Also, on a mult--check with city zoning and make sure it's grandfathered to have the units being sold to you with a certificate. Alot of neighborhoods downgrade zoning and don't address this certificate and after you own the property, the neighbors complain and they want you to reduce your property to a duplex or single family. This matter can cost you time, trouble, and money. Should be in the contract for the seller to "fess" up about the zoning. Nobody helps you on this. Be careful.