Help me try to fund these 3 purchases

9 Replies

I found 3 great rental houses in my local burbs of Chicago.

Here's the scenarios

2 TH's currently rented for 1400 by long time tenants 

- Sale price 130k worth 150k x2 = 260k loan

1 TH not rented but would fetch 12-1300

Sale price 80k worth 100k

Total loan 340k against 400k at 0 down but trying to find 10-15% to put down against sale prices.

I know it's not a ton of equity compared to a lot of flips and other deals I've seen but I'm trying to stay in more affluent suburbs and reo's are few and far between. I'm looking at the big picture of eventually having more equity when I turn to sell them in 10-15 years. DTI is in the 40s because of the two houses and decent but not substantial income.

I'm light on cash because I just built a new house and put 20% down on it.

Paid 454k

Loan 363k

I also own my original home turned first rental for 2300.00 a month

Worth 325k

Loan 218k

I've got close to 200k in equity in my two houses now. I'd like to eventually blanket my properties once I get 5 and can figure out how to get my DSCR above 1.2 on properties that are more expensive.

TIA for any help or paths this leads to.

If those are in frankfort, that os a great area.

But those just aren't good deals. When you add in closing costs and the like and probably repairs, you'd not even getting a 10% discount there. And with townhomes, you're probably going to be hit with HOA fees too.

On a brighter note, there was a post by @Michael Barbari 

today on how he can do HELOC's of up to 90% on your personal residence and up to 75% on investment property (provided the properties are in your name). If they're in a corporation name, I think he's got a referral to someone else at the bank to do it as well.

So that may be an option for you to get the money you need. He's in Illinois and I'm sure they'd do frankfort. They have a branch there I believe or very close to there.

Still, I'd be a little hesitant on those deals. Townhomes definitely have some risk, don't appreciate as much as SFHs and tend to be more difficult to sell.  That being said, the renter pool you'll get in frankfort will definitely be less risky than most any other areas you'll find down here.

I guess if you're happy with the cocr you're going to get at those prices and are just looking at the long term buy and hold advantages, then maybe its not a bad thing. My only concern would be that I'm not quite sure you're going to get the appreciation (i.e. the equity capture you mentioned above) in townhomes.

Historically, they just don't seem to appreciate anywhere near as much as traditional SFH's.

@Mike H.  

Appreciate the response and literally just talked to Michael.   

Hoa fees are pretty low on the units I found and actually like having a hoa for maintenance benefits, insurance, etc.  all the units would be rentable under the hoa and they actually screen the potential tenants also.  

I know I won't see a 10% increase in value a year like a sfr but look at them being pretty stable.  

I'm brainstorming to come up with 15% to try and go conventional and also found a nice sfr I could pick up for around 100k and put minimal into and get 15-1700 a month.  Buy and hold is going to be huge the next 7-10 years I feel as buyers recover from short sales and foreclosures and hope I can even turn around and offer owner financing later on. 

With all that being said I'm about 50-60k from paying for my daughters college in 15,16,&17 years with those houses. Lol

@Nick Versetto   if you're looking for a lender you will need to post a request in the Marketplace. I'm not sure if that's your question or something else. 15% down is the least I've seen recently for investment properties. And that requires PMI which makes it even more painful than just the higher loan amount. Lenders will use the lower of the purchase price or appraisal for the "value" for the LTV calculation, but I assume you know that.

You're definitely preaching to the choir here when you mention buy and hold.

And I think your model, while maybe not providing the best returns for an investment property strategy, might have a much lower risk level and/or be much easier to manage than most other typical portfolio strategies as well.  So the tradeoff for those things might well be worth the tradeoff you're giving up in returns.

And there's nothing to stop you from mixing in some other unit types (like that 100k deal you're looking at) to balance your portfolio out and get more returns with sfhs. 

Good luck with the deals. If you can pull off even a couple of those, you'd be starting the year off really well in my book. :-)

@Jon Holdman  I'm not looking for a lender but ideas on how to fund these loans and come up with a down payment. 

thanks @Mike H.   I'll keep you posted on what I come up with.  

What area of Illinois are you from?  What kind of investing do you do?

I'm actually about 20 m,inutes south of you.

I live in manteno...... Just south of peotone and north of bourbonnais off 57.

@Mike H.  I'm dying to hear how you came up with so many properties in such a sort time. I read your profile and it's pretty motivating.  

Shoot me an email any time. Who doesn't love to talk real estate 24/7?   :-)

[email protected]

But believe me, there is nothing special about me or my investing to suggest I would have some super secret strategy that somebody else can't do.  If anything, I would suggest it would probably be easier for someone to do today than when I did it.

Back when I started 6 or 7 years ago, getting the end loan financing was about as tough as anything you'd ever have to do. I literally just got an email from one of the portfolio lenders I use (i.e. local banks) asking how I was doing and if I was in need of any more loans in the future.  I told him I was closing on a house in 2 weeks and would love to bring that one over.

Banks are contacting us now!!!!!!

Maybe to most investors that has always been the norm. But, for me, there was a 3 year period where the refi's were taking 9 mos to a year on some of the deals I did because they'd fall through or banks would change their minds or they'd get cutoff by the govt from doing in-house loans.

So not only would I suggest you could do the same thing. But I actually think you could do it better and faster than I did. btw: The deals Im getting today are even better than I was getting during the bust. Go figure that one. 

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