Ways to put down less than 20%, not owner occupied, conventional?

Question

Hi All! I am a 25 year old new investor who just purchased her first duplex out of state a month ago. I am looking for ways to buy another with less than 20% down? Can you get any kind of conventional loan, not owner occupied, for less than 20%? are there certain banks that might do it, even if it's hard to find? The area I currently live in doesn't make sense to buy in (central NJ) so I bought my first in my hometown of Westfield MA, where I have my dad to manage on-site issues, while I rent here in NJ. Owner occupying in NJ isn't really an option (though I know it would allow me low money down), but again, returns are so poor here.

Any suggestions are welcome! Thanks!

Sierra Swords · Answer

Okay thanks guys! I didn't really think it was possible, but was listening to the new Real Estate Rookie podcast this morning. The guy was saying he put 20% down on a duplex "even though he had the option to put so much less". I posted while listening. Later in the episode he commented on how he was actually owner occupying. He had left that detail out for a while, while talking about the deal. I didn't know if there was something I was missing!

Kevin Romines · Answer

You can use a portfolio loan with 15% down. You could partner up with someone who will owner occupy the property for at least 1 year, and do an FHA loan with 3.5% down. You would be the non-occupant co-borrower in that scenario. Or you can do a Hard Money Loan with as little at 10% down, do a little rehab to force appreciation and then refinance to a conventional at 75% LTV or an FHA at up to 97.75%, when the rehab is done, provided you gained enough equity to do that?

I hope this helps?

Joseph Cacciapaglia · Answer

You can get investment loans for single family rentals with only 15% down, or at least you can here in TX. For duplexes or larger, I'm not aware of any programs currently.

David Martin · Answer

@Sierra Swords If you have someone you can trust that is willing to occupy, there are some lenders that will let you qualify for OwnOcc financing as long as at least one of the borrowers is in the home. In that situation you could, for example, buy a quad, have a trusted person as a coborrower that will guarantee 'rent' for the unit they are staying in, and operate prop management for you on site. After the year of OwnOcc requirements is up, they can move out, and how you split it from there is all negotiated up front, so maybe you keep the 75% of rents and they keep 25%, and any appreciation is a 50/50 or whatever makes sense. It's the only way I know of to access funds like that without personally having to be in the place.

Whitney Hutten · Answer

@Sierra Swords Conventionally lending generally starts with 20% down.  You might find a commercial product that will allow for less down (generally you have to have a track record to get those products).  Another way would be for someone to outright give you the money, let it season in your accounts, then purchase the property (I'm not sure who would do this without a note being attached to that... maybe a relative?).  OR partner up with someone (that would probably be a commercial product as well).  If you have a smashing deal, you can find the money.

Jaysen Medhurst · Answer

You're going to have a very difficult time purchasing an investment property with less than 20% down, @Sierra Swords. I've heard about some non-bank lenders doing them, but usually their rates are in the 6-7% range, which is bonkers in today's rate environment.

Have you considered a BRRRR where you can use HML? Or partnering with someone local, like your dad?