Need Help with Alternatives to Conventional Financing

7 Replies

Howdy BP, first time poster.

I'm looking for advice on how to acquire buy and hold properties without going through conventional loans, mostly because I just simply don't qualify (poor credit from student loans, no W-2, etc).

I just acquired my first property for a fix and flip through a HML here in Texas, and they were great to work with. No credit checks, no income checks, etc, so I was able to get the loan. 12.99%, 4 points, a slew of fees, 6 month loan.

However, to acquire a rental property through them, I would have to get the rehab loan, then move it to a long term loan at 6-7% (20-30 years) along with another 6 points up front. On a $150k property, this could cost me $10-15k+ in fees and points out of pocket with no equity in the property. Most HML's that I know of in the area have about the same conditions.

What kind of alternative options do I have, or is this about the best it's gonna get right now? I would love to start my rental portfolio, but the costs of these deals doesn't seem very sensible. Any advice would be greatly appreciated!

There are programs that allow for stated income and No Ratio Loans available, loans are based on DSC on the rental propertie. Down payments range from 20 to 30% depending on your credit score, Refinances and Cash Out are also available. Rates start a 6% up to 8's, 30 yr fixed available or 5/1 or 7/1 Arm

Thanks John. There are a few Hard Money lenders in my area that have as low as 10% down with similar terms, but I am looking to put down as little upfront money as possible. Something similar to the loans I can get on my fix and flip deals, but possibly with only one closing and fewer than 10 points upfront :/

I'm not opposed to putting money into the deal, but 15k in points or even 20-30% down on the house is definitely more than I can handle.

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Going through the MLS so those aren't viable options.

@Justin Flowers Welcome to BP! FYI - I've found a number of owner finance deals through the MLS or even through Craigslist.

Regarding financing from a bank, you didn't say how extensive the credit issues are, but try reaching out to small local banks that hold the loans in-house, as they can have more flexibility.  

Latest terms I was getting were 20% down of the purchase, 100% rehab, 1 point, 5% interest, 20 year term.  One closing in the beginning and the loan converted to the fixed term after the rehab was complete (commercial loan).

As you stated, the fees, points, etc will kill you over multiple properties.

Good luck!

Thanks Tom, that's solid advice, and much friendlier terms for sure. I live in a small town, so not many banks around, but I will definitely check with what is here. Much appreciated!

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