Tempe, AZ · Member since 2015 · 18 posts · 0 votes
I am a new investor and I am looking to house hack. So, my first property will be a multifamily where I will rent the other units and bedrooms in my unit to break even or create positive cashflow.
Now, I will use private/hard money to get into the property and complete the rehab. But when it comes time to refinance, I want to have another option besides a traditional 30 year mortgage.
Investor · Boston, MA · Member since 2015 · 398 posts · 147 votes
10y
First impressions: why is it not breaking even without renting bedrooms out? How many units is it? Do you have to go the hard money route? That's a lot of interest! I wouldn't go hard money unless you had another exit strategy.
As far as other creative financing ideas, aside from angel investments from family I don't know what to suggest without knowing why you need the hard money loan. Please provide more details.
Investor · Boston, MA · Member since 2015 · 398 posts · 147 votes
10y
First impressions: why is it not breaking even without renting bedrooms out? How many units is it? Do you have to go the hard money route? That's a lot of interest! I wouldn't go hard money unless you had another exit strategy.
As far as other creative financing ideas, aside from angel investments from family I don't know what to suggest without knowing why you need the hard money loan. Please provide more details.
Rental Property Investor · Lindon, UT · Member since 2015 · 862 posts · 438 votes
10y
Kevin, I agree with @Russ Draper, and also, why would your exit strategy be to look for something OTHER than a 30 year conventional mortgage? Your ultimate scenario, whether you use hard money or not to get there, is to end up with a conventional loan on a rental property and be at approximately 65-70% LTV, maximizing rents and tax breaks. Aim for that!
Lender · Nationwide Lender · Member since 2015 · 1k+ posts · 814 votes
10y
@Kevin Glover Why is traditional loans not an option. You want to pay more then you have to? Or your credit has issues?
Your alternative to traditional financing is hard money/private funding. So if you eliminate traditional financing, then the only option you are left with is hard money/private funding.
Tempe, AZ · Member since 2015 · 18 posts · 0 votes
10y
The reason a traditional loan is not an option (at least at this point) is due to credit and income. I don't think I would be able to qualify based on those two factors, although I haven't spoken with a mortgage banker.
Flipper/Rehabber · Pittsburgh, PA · Member since 2014 · 144 posts · 21 votes
10y
I would start by speaking to a mortgage banker who services AZ to verify that you need to go the hard money route first. Then, you must be very thorough in planning your exit of the hard money loan. Make sure you have an exit from the HML into a conventional/ conforming loan option 3-6 mos prior to your hard money term ending. The reasoning behind this is because those who enter hard money loans without clearly planning their exit can often find themselves in a cycle of extending and refinancing hard money loans while trying and failing to qualify for that last step, the conventional loan... if you don't qualify now or in the near future and your end goal is not the resale of the property, you may find yourself spending a ton of money on hard money fees and interest only to be forced to sell and start over in a worse position than you started.
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
10y
Many hard money lenders will not allow you to move in. When lending to someone who's going to occupy the house they're borrowing for, it is a residential loan and subject to a lot of regulations. Commercial loans are not subject to the same regulations and this is how most HMLs work.
Tempe, AZ · Member since 2015 · 18 posts · 0 votes
10y
@Jon Holdman So, in my situation where I would be looking to live in the property to offset living expenses and build my portfolio, what would you suggest as a viable option?
@Logan Drew That is excellent advice, thank you! I'm going to sit down with a mortgage broker and see where I'm at and where I need to be in order to get out of the HML.
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
10y
FHA if its in good condition, FHA 203K rehab loan if not. Or, borrow the money from other sources and pay cash. Or,put in a good down payment on a not-to-junky place and get a conventional loan. Or find an owner willing to sell to you with some type of owner financing.