Help with understanding lending process

6 Replies

Hi Everyone,

I am looking to get some more information about different financing options both conventional and non conventional.

I am just starting out in the RE investment world and I am looking only at long term buy and hold rental properties (both multi and SFR) I recently completed the purchase of my first few properties both with conventional financing with a 20% down payment.

Moving forward I am looking to add to my portfolio over the next 6 - 9 months. I am looking for some more information on financing options that may be available to me in order to maximize my saved capital and leverage position.

I am only looking at very modestly priced homes or units (between 100 - 150K) and I have about enough for a down payment for one other property in this range (around 20K) My plan right now is to wait a few months, get some experience under my belt as a landlord after getting my feet wet with these two properties and then pull the trigger on another property with similar characteristics as the ones I have recently purchased.

As I mentioned I have enough for a down payment for one more using the conventional financing method I have used with the first few but one more similar purchase will effectively drain the last of my capital. I am admittedly a complete novice in the investment business and I am on a huge learning curve with all the elements of RE investment that have come up. I am wondering if there may be other options available to me in the way of maximizing my capital to secure financing for more RE purchases.

Ideally I would like to build my portfolio as much as possible but I feel that my current capital can only stretch to one more conventional purchase and I will need to wait to save additional funds for the purchase of my next investments (hopefully coming from a mixture of my regular income and rental income).

I am wondering if any experienced investors on here have any advice for someone like me and can perhaps suggest some "outside of the box" methods of RE financing that I may not be aware of.

If I was to go with another conventional mortgage I would most likely use the same lender. Both my properties will be generating a modest cash flow and I am also wondering how long this cash flow will need to be serviced before the lender will view the properties as income generating assets as apposed to liabilities for the purposes of my debt to income ratio.

Any information on any of this would be greatly appreciated.

Thank you so much for your time.


A big part of this is going to hinge on whether you've realized any added appreciation to the properties. If not, there's nothing to access from those properties, so you will need to find additional lending sources. If you improved the properties, and have a strong W2 & good credit, there's a reasonably good chance you can access the 20% you put down by refinancing the properties you already own to pull your cash out, so you can purchase more properties. However, if these properties are only cash-flow winners with your money left behind, you'll have to either save more money from your rent & W2 or pay down the notes before refinancing. 

Thanks Jd,

I actually just bought them two months ago and have not done any work at all to either of the properties so there would not be any appreciation on either of the properties at this point. Unfortunately I do not think refinancing will be an option for me at this time but hopefully that is a strategy I can use for future purchases when I do build the equity in the home.

Right now I am trying to ascertain whether or not to use what is left in my savings as a down payment for one more property or if there is a way to get more creative with that small amount of capital I have left to have it stretch further for me. I have the desire to buy as many properties as possible using the capital I have and I have already used two thirds of it up on my first two deals using conventional financing. 

Thanks so much for your response and advice, it is very much appreciated.


My sister who lives in Australia is also looking to invest in some US RE also so I do have the option of partnering with her to build some extra capital but I would need to be the one who gets the loan as she does not live or work in the US so I am not quite sure if that is an option I want to explore at this point.

I'd suggest reading up on the BRRRR strategy and thinking of that $20k as the down payment you'll use over and over again on all of your future investments. The other thing to research is how to find GREAT deals. Ideally you should be finding properties to purchase at a significant discount. This is probably the most important skill you can develop as an investor.

If you use your $20k to purchase this type of house, improve it, then refinance it,  you should be able to get your $20k back and still have a 25% equity position in the newly acquired rental property...not to mention solid cash flow.  You can then move on to purchase the next property with that same $20k.  

In fact, if you accept those as your parameters, you'll force yourself to develop those deal finding skills that will make or break you as in investor. 

Try and work with the seller, maybe they are willing to provide a vtb allowing you to inject as minimal equity as possible.

You can also try a sandwich lease with an option to purchase - another way to limit your exposure in the deal and inject minimal cash.

There are many ways to work with limited capital and no bank financing. Try searching for other creative financing structures and find the one(s) that work best for you.

Thanks so much guys.

I have looked at the BRRRR strategy fairly extensively but my issue with it is that I have no experience in rehabbing properties and would be worried I would end up picking the wrong place and actually losing money.

At this point I want to try to stay with the very basic and Conservative strategy of buying rental properties that provide decent cash flow for long term buy and holds. Perhaps I can move on to some other strategies later on but right now I do not have the confidence to go all in on a rehab etc... I know that I can make much more money by flipping and refinancing properties but I just do not feel like I am there yet as an investor. I also feel like the fact that I live in CA makes it hard as I feel like there may not in as many of those kinds of deals available here as there would be in other parts of the country. The prices are outrageous here and both my rental properties are actually out of state (IN and NC)

I haven't heard too much about working with the sellers in terms of financing, Are those kind of deals found in the same places as other properties or are there specific avenues I can explore to find properties that provide seller financing? I will also have to research sandwich leases.

Thanks again everyone for your time and help.


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