I'm looking for some advice regarding if it's possible to buy a 2 family without a down payment or a lot of cash in the bank. We currently own a co-op that we rent out and are living in a 2 family where we rent out half. We found another 2 family that we would love to move into, but after our major reno on the current place, we don't have money for a down payment. We would easily be able to cover the mortgage and expenses month to month, but I'm pretty sure that we wouldn't qualify for a traditional mortgage with our current situation. I'd love feedback on if there are any non-traditional methods for financing this, or if this is just a pipe dream for now. Here's a breakdown of some of the numbers:
-We have an income of about $120k without factoring in our rental income which adds another $36k. We have been renting the co-op for 1.5 years ($500/m profit after expenses) and the 2-family for just shy of a year ($1475/m towards a $2485/m expenses).
-We don't have enough equity to take a HELOC on the house, and due to some issues with the co-op association, a HELOC on that isn't possible either.
-We have good credit (upper 700's) and are currently at about 33.6% DTI with the two mortgages, student loans, and car loans (including the two rental properties).
-With the new house, we anticipate being able to rent the unit we currently live in for $2000/m (for a profit of $990/m after expenses) and approximately $1800/m anticipated in rent in the new house towards $4212 in monthly expenses. If you add all the rental income together, we would be responsible for about $912/m of the new mortgage.
Thanks so much!
Firstly, a duplex is a residential property (1-4 units) and not really a multifamily (5+ units), so it is financed the same as any other residential property.
You're probably a little short on time-in-the-saddle to have your rental income count towards conventional financing. The obvious paths your could explore are:
1) If you have a good rapport with your bank, work with them to see if you might be able to secure conventional financing - perhaps you can convince them to count your rental income now.
2) vendor financing or wrap - see if the present owner of the duplex in which you are interested is able/willing to carry the mortgage for 2-3 years to give you time to season your rental income. If the owner has a mortgage on the property, you could look at doing a wrap. Caution: if this is a listed property and a realtor is involved, s/he may not be keen on presenting such options .... they frequently are more concerned about commission than client.
3) Find a private lender willing to carry the financing ... you may need to pledge the equity in your other property(yes) as additional collateral and will undoubtedly pay a higher interest rate.
@Roy N. Sorry for the delayed response, somehow I missed your feedback. I forgot to consider the idea of homeowner financing or a wrap loan. I more or less understand the concept of the homeowner financing, but I'd have to look more into the wrap loan, I'm not very familiar with that. Thanks for your input!