Looking for $50k to get my 4th Single Family Home

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Looking for $50k to get my 4th Single Family Home

Dylan Wickersham
Member since 2020 · 8 posts · 0 votes

What kind of interest rate and terms would you look for on $50k for my down payment on a deal. Maybe I'm asking the wrong group here. I have 3 single family homes that I've purchased on my own with 30 year fixed financing. Looking into a total OPM deal. Property meets the 1% rule, is a student rental with a lease for August at 20% COC return (if I were to fund the down payment).

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Dominic Pizzi
Lender · Freehold, NJ · Member since 2022 · 236 posts · 85 votes
3y

Don't be too focused on the interest rate. In this business there will always be a coulda shoulda or woulda. Truth be told, if your property cash flows well at an interest rate between 7.75%-8.00%, then the interest rate is not what matters too much! 

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  • Chris Davidson
    Real Estate Agent · Boise, ID · Member since 2016 · 1k+ posts · 888 votes
    3y

    @Dylan Wickersham Will your lender allow for the down payment to be borrowed? If not find one that will otherwise it doesn't matter what rate and terms would be for the down payment. 

    Can you get a HELOC on one of your single family homes to fund the down payment this would will be easier to do in the lenders eyes. If not what if you do a cash out refi on one of them?

    Best of luck!

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  • Ian Murray
    Member since 2021 · 28 posts · 14 votes
    3y

    Dylan,

    I would need more information to be able to give you an answer. What is your repayment strategy? Meaning, do you desire to amortize the down payment loan over 2, 10, 20, or 30 years, or do you plan to repay it upon closing or in 12 months? Also, how much will you have invested in the deal upon closing? Does the property need rehab, or is it turnkey? What would the LTV be of the property between the two notes?

    You are likely looking at 12-15 percent interest, at a minimum, for a second-position, down payment loan, especially if the LTV will exceed 80 percent. You may also want to look at some kind of equity split to get better terms from the PML.

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  • Dylan Wickersham
    OP
    Member since 2020 · 8 posts · 0 votes
    3y

    Thank you Ian and Chris! I've spoken with my mortgage broker/friend and she suggests a line on one of my other investments. I may start another post for this question: Does anyone know of a good lender that does HELOCs on NON-primary residences? I have 150 in equity in my first investment.

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  • Dominic Pizzi
    Lender · Freehold, NJ · Member since 2022 · 236 posts · 85 votes
    3y
    Quote from @Dylan Wickersham:

    Thank you Ian and Chris! I've spoken with my mortgage broker/friend and she suggests a line on one of my other investments. I may start another post for this question: Does anyone know of a good lender that does HELOCs on NON-primary residences? I have 150 in equity in my first investment.


     Dylan, 

    Might also be beneficial to do a cash out refinance on your investment to come up with necessary funds, outside of a HELOC!

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  • Jay HurstBusiness Member
    Lender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
    3y
    Quote from @Dylan Wickersham:

    What kind of interest rate and terms would you look for on $50k for my down payment on a deal. Maybe I'm asking the wrong group here. I have 3 single family homes that I've purchased on my own with 30 year fixed financing. Looking into a total OPM deal. Property meets the 1% rule, is a student rental with a lease for August at 20% COC return (if I were to fund the down payment).


     The only time you can borrow for down payment funds is with a collateralized loan. (well, for any loan that is reasonably underwritten anyway)  That means you are borrowing against an asset you already own. As mentioned above another piece of real estate, 401k, stock portfolio etc.  However, you need to understand if you do not have a way to pay this additional loan back quickly you have essentially leveraged yourself 100% on the property you are buying.  That of course can work but it is harder to find deals that will still pencil out when financing 100% and more risk even if it does.  But, if it works and the risk is worth then go for it. 

    Hurst Real Estate, INC4.991 Reviews
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  • Dylan Wickersham
    OP
    Member since 2020 · 8 posts · 0 votes
    3y
    Quote from @Dominic Pizzi:
    Quote from @Dylan Wickersham:

    Thank you Ian and Chris! I've spoken with my mortgage broker/friend and she suggests a line on one of my other investments. I may start another post for this question: Does anyone know of a good lender that does HELOCs on NON-primary residences? I have 150 in equity in my first investment.


     Dylan, 

    Might also be beneficial to do a cash out refinance on your investment to come up with necessary funds, outside of a HELOC!


     I should have done a cash out refinance 2 years ago. Rate is 4.25% and I just don't want to mess with it. Heloc has a lesser payment because I have less borrowed at the higher rate.

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  • Dominic Pizzi
    Lender · Freehold, NJ · Member since 2022 · 236 posts · 85 votes
    3y

    Don't be too focused on the interest rate. In this business there will always be a coulda shoulda or woulda. Truth be told, if your property cash flows well at an interest rate between 7.75%-8.00%, then the interest rate is not what matters too much! 

    1Reply
  • Dylan Wickersham
    OP
    Member since 2020 · 8 posts · 0 votes
    3y

    Current Mortgage Balance 121,000 3.875% $902/month rented $1700

    Heloc for 50k 9.6% $442/month (paid by new investment)

    Total: $1342

    Cash out refinance: 7.25% $1549

    $200/month difference or $2400/year or $72,000 over 30 years. This doesn't account for the new amortization. I think somewhere between 6% and 7% you're paying more interest than principle over the life of the loan. 

    @Jay Hurst do you lend heloc's on investment properties?

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  • Jay HurstBusiness Member
    Lender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
    3y
    Quote from @Dylan Wickersham:

    Current Mortgage Balance 121,000 3.875% $902/month rented $1700

    Heloc for 50k 9.6% $442/month (paid by new investment)

    Total: $1342

    Cash out refinance: 7.25% $1549

    $200/month difference or $2400/year or $72,000 over 30 years. This doesn't account for the new amortization. I think somewhere between 6% and 7% you're paying more interest than principle over the life of the loan. 

    @Jay Hurst do you lend heloc's on investment properties?

    It depends on what state you property is in.  But, understand rates are higher then your number above right now on second lien on investment properties plus HELOC's are variable.  Might actually be better with a fixed rate second to have a knowable number. 
    Hurst Real Estate, INC4.991 Reviews
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