Rental Property Investor · MO · Member since 2024 · 23 posts · 23 votes
I have been devouring all real estate information for about a year. I’ve been scouring marketplace, Zillow, auctions, and have been driving around. I finally found a great deal that will cash flow and give me everything that I’ve been looking for, but I can’t get a loan without a bigger down payment than I can afford. The property can be bought for about 175K and it already has tenants and brings in 2600 per month. What can I do? How can I find a way to make this work when I only have 20K of my own funds to put in? And have a great credit score and a steady income but I have a mortgage on my primary as well. This would be a long-term rental and I would want to hold. The short term and balloon payments that seem to come with hard money are pretty intimidating. Does anyone have advice for me to finally take the plunge and be able to make this first deal work?
Real Estate Agent · Puyallup, WA · Member since 2022 · 551 posts · 378 votes
2y
You're going to need to reach out to the people you know for a potential partnership.
Remember, this is also only a 4plex so you are still able to only put down 3.5% -5% if you house hack it. Might be a good way to get your foot in the door, not having to partner with anyone, low downpayment and a cash flowing asset.
Real Estate Agent · Member since 2024 · 39 posts · 17 votes
2y
Hi Shane, I want to tell you something from my research because it seems that we've been doing the same thing when it comes to educating ourselves on RE. Given that you already have 20k, which is around half of the down payment, try to leverage family and friends as private money lender in order to complete the down payment.
Second, depending on how long you had your primary, assuming that you did not cash out anything from the equity, you can try out this option ( no need to cash out all, just cash out the amount that you need to make this deal happen).
just my humble opinion based on what I have learned!
Lender · Charlotte, NC · Member since 2019 · 467 posts · 279 votes
2y
You have step one right. Find the deal. Money follows deals, not the other way around.
Next, reach out to friends, family, etc. Have your numbers, know them cold. Have a presentation, or at least be able speak about the next 6-12 mos, and what's in it for them.
Then, reach out to a mortgage broker, and see what your options are. Build that financial gameplan.
Real Estate Agent · Puyallup, WA · Member since 2022 · 551 posts · 378 votes
2y
You're going to need to reach out to the people you know for a potential partnership.
Remember, this is also only a 4plex so you are still able to only put down 3.5% -5% if you house hack it. Might be a good way to get your foot in the door, not having to partner with anyone, low downpayment and a cash flowing asset.
If you are willing to move into the property for a period, you can try to look into primary residence loans such as FHA which have a 3.5% down payment requirement. To meet the terms of a primary residence loan, you will need to live in the property for a year. After the year, you can move back to your current house while keeping the FHA loan.
If you are willing to move into the property for a period, you can try to look into primary residence loans such as FHA which have a 3.5% down payment requirement. To meet the terms of a primary residence loan, you will need to live in the property for a year. After the year, you can move back to your current house while keeping the FHA loan.
I currently have a primary residence and my wife is opposed to moving to the 4 plex.
Moving in to the property for a year is by far the easiest answer. You have more than enough to do that.
Otherwise it’s families/friends/partner/sell stuff/personal loan/borrow against something else or see if someone will do a 2nd for 10%.
But moving in is 100% the best deal for you, the easiest and most rewarding. The others involve more risk or less reward.
Alas, I may have to liquidate some assets because I know this is a good deal, but I was hoping to avoid it if possible. I'd be open to a partnership if I could find someone open to it and trustworthy. That's very difficult.
can you post the numbers? if this is on market, and wasn't immediately snapped up, i suspect it may be in a more challenging area...
Sure, it just came available and it isn't the best area but livable. 5 bedroom, 4 bath converted 4-plex that is over 2700 sqft. It's in a fairly small town has tenants for the next 10 months. I'm hesitant to post the address because it's not on the MLS and I want to make this deal happen.
Lender · Riverside, CA · Member since 2017 · 248 posts · 98 votes
2y
@Shane Duncan are there 401k or other fund like life insurance policy you can tap into? Is seller financing an opportunity? If none of these work, while not the solution you want, you could try to wholesale this deal and use the proceeds to add to your stock for the next deal... I can guarantee this won't be the last deal you find. You've clearly been exercising your mental muscle for deal analysis and there will be others.
I have been devouring all real estate information for about a year. I’ve been scouring marketplace, Zillow, auctions, and have been driving around. I finally found a great deal that will cash flow and give me everything that I’ve been looking for, but I can’t get a loan without a bigger down payment than I can afford. The property can be bought for about 175K and it already has tenants and brings in 2600 per month. What can I do? How can I find a way to make this work when I only have 20K of my own funds to put in? And have a great credit score and a steady income but I have a mortgage on my primary as well. This would be a long-term rental and I would want to hold. The short term and balloon payments that seem to come with hard money are pretty intimidating. Does anyone have advice for me to finally take the plunge and be able to make this first deal work?
One thing get you closer is : You need a DCSR loan. This is a loan where the monthly rental income is considered and not your income.
The math behind is like this 175k loan is roughly mortgage payment of 1408 per month ( This is with 9% interest rate, DSCR tend to be 1-2% higher ) + insurance and Taxes. So you are looking at roughly $1800. You get $2600 per month. Underwriter/lender accounts 75% of that which is $1950 which is perfect. So you could get a DSCR Loan.
However most DSCR loan I know want to see at least 20% down, but you might be able to find a lower lender or you would need to get a hard money loan and season it for 60 days and then close with the lender.
Anyways 175k for a 4plex is very cheap.... cashflow is strong but when it's so cheap... it might be in a not very desirable neighborhood. Make sure that you get the rentroll and the bank statement to verify that those tenants are paying that amount of rent. I don't think they do.... you don't want to buy something which is only nice on paper.
yep, don't need the address or even the city. was just looking for the expenses. financing, taxes, insurance, deferred maintenance, groundskeeping, shared utilities, property management...
like i said, i'm skeptical that it will truly cash flow as much as you think it might.
yep, don't need the address or even the city. was just looking for the expenses. financing, taxes, insurance, deferred maintenance, groundskeeping, shared utilities, property management...
like i said, i'm skeptical that it will truly cash flow as much as you think it might.
Sure. The numbers I'm using are purchase at 175k, 20% down, 8%, for 30 years. The property manager said it has full occupancy and brings in 2600 per month. Each tenant pays 75 per month for utilities which he claims is covering it each month, even during cold spells. I estimate 3k for closing, 65 per month for taxes(that came from Zillow), got a quote of 309 per month for insurance, 10% repair and maintenance, 5% for vacancy, and 5% for cap ex. I also added the 300 for electric. With those very conservative estimates I'm still getting $381 cash flow and CoC ROI of 12.05%. I plan to self manage.
that's a good start, but it seems like you need to verify some of those numbers - for example, taxes and utilities. and is every unit truly pristine? there's no deferred maintenance? no aging furnaces, no janky plumbing, no worn out cabinets? one furnace would take up 4 years of your capex budget.
that's a good start, but it seems like you need to verify some of those numbers - for example, taxes and utilities. and is every unit truly pristine? there's no deferred maintenance? no aging furnaces, no janky plumbing, no worn out cabinets? one furnace would take up 4 years of your capex budget.
Rental Property Investor · MO · Member since 2024 · 23 posts · 23 votes
2y
@Nicholas L. That is a great point. I’m going to visit the property tomorrow and he is taking me through each apartment. I’ll be able to ask some in depth questions about everything. So far, he said responded to some of this questions with,
“All new interior remodel, new electrical, new plumbing mostly new HVAC. $120,000 spent in repairs over the last 4 months. Exterior needs very minor cosmetics. New roof.” My first instinct was skepticism but it seems legit. The owner is aging and consolidating his rentals to a single area. This is the last one he has in this remote location.
Real Estate Agent · Houston, TX · Member since 2021 · 1k+ posts · 715 votes
2y
Hey there, it's awesome that you've got 20k saved up, but tackling that 155k gap might feel a bit overwhelming. First off, talk to your network—family, friends, or potential private lenders who might be on board with your vision. Look into creative financing options like seller financing or owner-occupied loans if you plan to live there during renovations. You could also explore hard money loans, but be cautious due to shorter terms and higher interest rates. Another idea is to team up with another investor, combining your down payments to hit that magic number. Just remember, each option has its own pros and cons, like relying on personal relationships for private lenders or dealing with less conventional terms in creative financing. Also, keep in mind factors beyond the down payment, like closing costs, potential renovation expenses, and the need for property management. Before taking the plunge into your first investment property, meticulously analyze the property's financial aspects, vacancy rates, and potential expenses.
If you are willing to move into the property for a period, you can try to look into primary residence loans such as FHA which have a 3.5% down payment requirement. To meet the terms of a primary residence loan, you will need to live in the property for a year. After the year, you can move back to your current house while keeping the FHA loan.
Can you expand on this? How do you prove that you have changed primary residences? This is intriguing to me and I'm sure others as well. I've been in my primary residence for 20 years and am building up cash now so I could see myself in this same position.
Any input you can give on this unique "hack" would be great! :)
If you are willing to move into the property for a period, you can try to look into primary residence loans such as FHA which have a 3.5% down payment requirement. To meet the terms of a primary residence loan, you will need to live in the property for a year. After the year, you can move back to your current house while keeping the FHA loan.
Can you expand on this? How do you prove that you have changed primary residences? This is intriguing to me and I'm sure others as well. I've been in my primary residence for 20 years and am building up cash now so I could see myself in this same position.
Any input you can give on this unique "hack" would be great! :)
good luck and keep us posted. something is not adding up, if you're trying to offload a portfolio you would not spend $120K in repairs, you would just sell it as is.
good luck and keep us posted. something is not adding up, if you're trying to offload a portfolio you would not spend $120K in repairs, you would just sell it as is.
Will do. I'm pretty skeptical myself but I can't pass up the chance that it is legit. Thanks for helping me think this through.