Hello BP! I have a problem I can't figure out. I need about $12k to reduce my debt to income ratio.
I have a condo for my first rental property and a unit 2 doors down just went on the market as a foreclosure for $85k. I bought mine in 2012, also foreclosure, for $125k. I talked to my bank and they are willing to finance it except I have too high of a debt to income ratio. I have $15k for downpayment/closing costs and I can use my 401k as reserves. My current unit rents for $1500/month. This unit will cashflow about $500 a month. I have $12k left on a loan for a separate side business I run and paying that off would get me to the correct debt to income I would need. Buying the unit at this price I would instantly have at least 20-40k equity. My current condo was a first time home buyer deal so I technically have 2 mortgages on it, so I can't really access the equity (refi would have significantly higher interest rates).
I only have one family member who has enough money to loan out this kind of money, and he already said no.
I have reached out to several other lenders I've found advertised here and they all want either way more up front (one wanted $40k!) or the price, after down payment, was just too low for them to finance.
So I'm a bit stuck. I could use all my savings and wipe out a lot of my debt, but then I have $0 fallback or downpayment money. I also live paycheck to paycheck with extremely tight margins so "saving more" is not an option.
Also, the condo needs all the appliances. I figured an equity loan after closing would be able to pay for that stuff. Minimal reno needed.
Do you have enough extra in your 401k to take an early withdrawal? It sounds like it would be worth it!
@Jason Dale Have you considered finding a partner for the deal? Half of something is better than all of nothing.
The problem is, my 401k has just enough balance to be considered reserves for both rental units.
I really don't want a partner, at least for this deal since I'm so close.
As for the business loan, I only got my LLC finally created about a week or two ago. My bank only offered a line of credit, for around $25k, for new businesses. I may have to find another bank
Would a bridge loan be good for something like this?
@Jason Dale you can't buy them all, trust me I have tried. Make them a lower offer, put it under contract for $80K, then wholesale it for $100K. Sell the $25K equity to a buy and hold guy or flipper. Use the profit to pay down your debt and you can buy the next deal that comes your way. To improve your DTI, increase your income and pay down debt. You are broke at the moment, so $500 of potential cash flow may not materialize for months. You can make $500 in one weekend driving UBER.