How to get Financing if I dont qualify for a Conventional Loan?

8 Replies

I am a 22 yr old new to the Real Estate Investing world,and I have been having a really hard time finding a way to find financing for rental property.

I have an ok credit, but my current job is commision and banks require minimum 2 years at the same position to consider my salary, they only take my base(1200/mo).

I have the capital to do a 20-30% for a 100k-130k property. 

I dont want to wait 1 more year untill I have the 2year period at my job....

What is an alternative to finding financing in my situation? Any suggestion is appreciated!

Thanks in advance!

Check out local banks and credit unions. They may be more willing to work with you. Otherwise, I would try to find a partner that has credit you can rely on. That could be either another investor, partner, relative, or even a seller. For example, you do some marketing, find a home that someone wants to sell and offer to split the profit with the seller. They provide the credit for a loan while you do the management and flipping(if thats the plan). Even more ideal would be if they are willing to seller finance the home to you and you offer to split profit with that financing available. Obviously, you'll need to develop the deal in such a way that they know they won't be screwed over as well as your self. I know you don't intend to do a bad job at managing a rental but maybe things go down hill, or maybe you find out after making months of payments the sellers have been pocketing the money and not paying the mortgage and then the bank foreclosures. Cover your but!

There may also be private money sources in your area.  The rates will be higher than a bank or credit union, but it is an option.

Originally posted by @Steven J. :

Check out local banks and credit unions. They may be more willing to work with you. Otherwise, I would try to find a partner that has credit you can rely on. That could be either another investor, partner, relative, or even a seller. For example, you do some marketing, find a home that someone wants to sell and offer to split the profit with the seller. They provide the credit for a loan while you do the management and flipping(if thats the plan). Even more ideal would be if they are willing to seller finance the home to you and you offer to split profit with that financing available. Obviously, you'll need to develop the deal in such a way that they know they won't be screwed over as well as your self. I know you don't intend to do a bad job at managing a rental but maybe things go down hill, or maybe you find out after making months of payments the sellers have been pocketing the money and not paying the mortgage and then the bank foreclosures. Cover your but!

 First I want to thank you for helping out, now regarding your post, dont you think a partner for a hold property could be a headache down the road? I think that would be more addecuate for a flip situation. 

As for seller financing, do they normally offer long term financing? 

I been reading about a portfolio loan, but cant seem to find the base requirements...Do you think I could qualify for a portfolio loan with my current situation?

Once again thanks for your input!

Hi @Javier Acosta I suggest you do a local internet search in your area for hard money lenders. Hard money lenders are generally more property and exit strategy based than your credit or financials. This might be a way you can get started in your investing business without traditional banks and lenders.

Good luck!

@Javier Acosta You're welcome. As for partners on a buy and hold its depends on your agreement that you have and who does what. Personally, I think I'd be more comfortable with buy and hold rather than flip partners. My ideal situation is where my partner(or seller providing seller financing) brings the money to the table, I manage and pass along part of the profit. They get no say in how things are managed, they simply sit back and collect their monthly income. With flipping I'm afraid they would try to voice their concerns and take over the project more than I would like. For some reason, practical or not, I imagine they want to be more involved because of a different mind set. Flippers, and lenders to those flippers, want their cash fast and a lot of it where as long term lenders would rather see steady monthly income. Maybe its because I'm a long term hold mentality.

Seller financing can be all over the place. In my market you can do private lending for around 6-8% over 5-15 years either interest only or P&I. It really depends on the saviness of the person, your pitch and how much they trust you, and what their goals are with receiving money back. 

A portfolio loan, correct me if I'm wrong, is for multiple properties wrapped together in one loan. For example, you have 6 SFHs and want to refi to pull some money out. You can put them all under the same loan, a portfolio loan, and get the benefits of that type of loan. I'm not super familiar with what common terms are on those but there is some perk. Biggest catch is once homes are in a portfolio loan you can't sell one of the six without some big headaches along the way. 

You can ad a flat salaried 2nd job to increase your income.

Do you have a car payment? Trade it in for a free and clear one. 

These two changes should sway your debt to income ratio favorably.

@Javier Acosta , you don't need a bank or credit to invest in real estate. If you're goal is to acquire buy and hold properties one way of going about is creative financing. Some examples include: subject to, owner financing, lease options, etc. 

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