How to Finance My First Investment Property??

Question

I found a deal on a HUD Foreclosure home that I want to buy and hold. This would be my first investment property. You can see my numbers below:

I can only spend roughly $6,000 out of pocket.. I have a great credit score and have already been pre-approved by a lender. This would be my first and only mortgage, so he said I could claim it as a primary residence and still rent it out. This would allow me to purchase the property closer to a 3% down payment. My only concern with this is liability. For this reason, I would prefer to put the property in a LLC, but I can't afford the 10% down payment, closing costs, and renovation costs by myself.

My question is, how do I finance this?

1.) Do I claim it as a primary residence? If so, can I transfer it to a LLC in the near future and how would that affect my interest rate or loan structure.

2.) Do I create a LLC and partner with someone who can help with the renovation costs and split the cashflow?

3.) Are there some obvious creative financing options that I'm not thinking of that I can benefit from?

If possible, I would like to purchase the property as the sole owner and rent it out. I plan on doing the BRRRR strategy if this deal works out.

Any help or recommendations are greatly appreciated, and please correct me if I am misinformed about any of my concerns. Thank you in advance for your time!

- Derrick Reeves

Derrick Reeves · Answer

Thanks for the advice @Annchen Knodt! Since creating this post, I have decided to open a LLC and seek advice from a real estate friendly CPA and Attorney in my area, before partnering and submitting an offer.

Annchen Knodt · Answer

Hi @Derrick Reeves,

This isn't my area of expertise, but I think that claiming a rental as an owner-occupied residence for better loan terms might be considered mortgage fraud, and so I would definitely consult with an attorney before thinking about considering it!

I also hear that HUD homes can sometimes be tough to deal with, so this would seem to me like a deal that would be best to do with a partner with some experience.

Another important thing to remember is that you should always have some reserves on hand, so you don't want to stretch yourself to the limit to acquire the property and not have much left - another reason for partnering.

I hope it works out - seems like it could make a good deal!

How to Finance My First Investment Property??

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