Loan question to discuss

[Ariel K.]

I am looking to buy a 4plex in Austin for $460,000. I Own the one next door and 7 months ago it appraised for $507,000. This one couple potentially appraise for more, but for example’s sake, let’s use $510,000 for ease. Is there a way to fold this $50,000 in equity to lower my down payment from $115,000 to $65,000? Or is there some other way this equity can be used?

Thanks!

[Ariel K.]

@Ariel Kumpinsky

Or would it be possible to say get a $500,000 loan, put 25% down and subtract the difference for my down payment? In this case $125,000 - $40,000 (difference between $500k and $460k) = $85,000 down payment + $375,000 loan?

[Andrew Postell]

@Ariel K. I think I am following what you are asking.  If I am understanding you correctly, you are asking if you can receive a "2nd mortgage" on a property for your down payment (or some if it). So if you are wanting to get a Fannie/Freddie type of loan the answer is no.  They do not allow those types of 2nd liens on investment properties.  A commercial/portfolio may allow this but admittedly many do not.  If you do receive a commercial/portfolio style loan the rate and term will be very different.  The most common type in Texas is a 20 year, Adjustable Rate Mortgage with a rate right at 6.75% at the time of this post.  That might make your numbers not look so well when having a 2nd lien on the home with it.

In general, most of us look for home in disrepair for the very problem you described above.  The downpaymet requirement on homes on the market are just too darn high.  And then you have closing costs too!  So if you buy a home at market rate...you are actually paying OVER market rate because of closing costs.  If this is your primary home, then maybe there's a reason to over pay...school zone, job, security, etc.  But as a business investment...you are not allowed to over pay (I mean you can if you want but your business won't function for very long).

So we look for properties in disrepair, buy at a deep discount, renovate them, refinance, and repeat...or the BRRR strategy using a Bigger Pockets term.

Hope this helps in some way but feel free to tag me with any other questions. Thanks!

[Daniel Boben]

@Ariel Kumpinsky  - did you end up getting the 4plex in Austin? I'm just starting out in Houston (1 SF long term rental), interested in getting something in Austin though. 


Originally posted by @Ariel K.:

I am looking to buy a 4plex in Austin for $460,000. I Own the one next door and 7 months ago it appraised for $507,000. This one couple potentially appraise for more, but for example’s sake, let’s use $510,000 for ease. Is there a way to fold this $50,000 in equity to lower my down payment from $115,000 to $65,000? Or is there some other way this equity can be used?

Thanks!

[Ariel K.]

I did end up getting it.  Feel free to contact me offline if you want.