Looking to make second purchase

8 Replies

Six months ago, I purchased my first rental property. I obtained a traditional mortgage on the investment property, but have since paid that off when I refinanced my primary residence. So I have an investment property with 100% equity. My question is, how can I go about obtaining financing to make a second purchase? I'm looking at a $85,000 investment and I have about $25,000 to put down. What are my best options to complete this transaction? Thank you.

@Chris Hedlund - So you have a loan against your primary and a rental with 100% equity? 

Can you do a cash-out-refi against the rental property and use that as the down payment? This is what we did (aka BRRRR) to successfully grow the rental portfolio.

Does that make sense? 

Thanks Cameron - yes you are correct about the mortgage on primary residence and rental with 100% equity. I was thinking about doing what you suggest, but I don't know if lenders would support me in doing so. I guess I could try. I was planning on using my rental equity as leverage for the new loan.

your rental equity is not liquid cash form. Meaning you cannot pull money out of that property unless you decide to sell it, hence you need to leverage your properties for a cash out refinance, or HELOC (Home Equity Line of Credit) in order to pull cash to support this second property.

Other options - do you have any  other means of income in addition to your 25k? 401k? Savings accounts? another job? Those could count as means of income/assets. 

Although I have a few more houses, I'm having this issues. I've purchased everything cash but now I want to use the leverage on them. Problem is, the houses I own range between 50-100k Value. Which so far, I've been unable to find a broker/bank that wants to take out a mortgage for that size (about 60k a mortgage per house). I've heard about blanket loans or  cross collateral but that's outta my realm as of right now but gonna be looking into it more

Originally posted by @Jeremy Garrido :

Although I have a few more houses, I'm having this issues. I've purchased everything cash but now I want to use the leverage on them. Problem is, the houses I own range between 50-100k Value. Which so far, I've been unable to find a broker/bank that wants to take out a mortgage for that size (about 60k a mortgage per house). I've heard about blanket loans or  cross collateral but that's outta my realm as of right now but gonna be looking into it more

From a bank's perspective: Loan amounts drive revenue, # of loans drives compliance costs. At $100k there is minimal profit, at $50k most banks are taking a loss. There are some folks by the names of Dodd and Frank we can thank for that.

But there are folks who will work with that. Find $50k listings in the area, call the listing agent, ask for a referral. 

Originally posted by @Chris Mason :
Originally posted by @Jeremy Garrido:

Although I have a few more houses, I'm having this issues. I've purchased everything cash but now I want to use the leverage on them. Problem is, the houses I own range between 50-100k Value. Which so far, I've been unable to find a broker/bank that wants to take out a mortgage for that size (about 60k a mortgage per house). I've heard about blanket loans or  cross collateral but that's outta my realm as of right now but gonna be looking into it more

From a bank's perspective: Loan amounts drive revenue, # of loans drives compliance costs. At $100k there is minimal profit, at $50k most banks are taking a loss. There are some folks by the names of Dodd and Frank we can thank for that.

But there are folks who will work with that. Find $50k listings in the area, call the listing agent, ask for a referral. 

Thanks for the reply! However, I'm not currently looking at sub 50k houses right now since I'm prioritizing on finding a way to get a cash out on the ones I currently own to have the cash in my pocket to then further my progress. I guess you're saying by finding a realtor selling sub 50k properties, they may know a bank that's offering mortgages on smaller loans?

 

Originally posted by @Jeremy Garrido :
Originally posted by @Chris Mason:
Originally posted by @Jeremy Garrido:

Although I have a few more houses, I'm having this issues. I've purchased everything cash but now I want to use the leverage on them. Problem is, the houses I own range between 50-100k Value. Which so far, I've been unable to find a broker/bank that wants to take out a mortgage for that size (about 60k a mortgage per house). I've heard about blanket loans or  cross collateral but that's outta my realm as of right now but gonna be looking into it more

From a bank's perspective: Loan amounts drive revenue, # of loans drives compliance costs. At $100k there is minimal profit, at $50k most banks are taking a loss. There are some folks by the names of Dodd and Frank we can thank for that.

But there are folks who will work with that. Find $50k listings in the area, call the listing agent, ask for a referral. 

Thanks for the reply! However, I'm not currently looking at sub 50k houses right now since I'm prioritizing on finding a way to get a cash out on the ones I currently own to have the cash in my pocket to then further my progress. I guess you're saying by finding a realtor selling sub 50k properties, they may know a bank that's offering mortgages on smaller loans?

  

Correct. A Realtor listing $50k homes either knows someone local doing $47,500 loans, or she doesn't get paid. When a paycheck is on the line, miraculously everyone knows how to get the job done, or who can get the job done, right?