What are our financing options?

7 Replies

Been listening to the RE podcasts and now my father and I would like to partner up and buy a small multifamily in PA for less than $100k. I am very able to renovate and do landlord type fixes. We are very new to investing. Where do we begin to figure out our best financing options?

Here is some info about us...

I am in my 30s and have a short history of income. I consider myself a jack of all trades. I have about $20k in savings. I'm carrying a small note on a rural 10 acres (only collect $200/month) and holding a 5 acre property in Oregon (probably worth about $20k). I have a low credit score of about 700.

My father owns his home worth about $250k and has great credit and good income.

Please go easy on me, I'm new to financing, but I gave done a couple land deals so I know a little about tax deed auctions, purchase agreements, title companies, recording deeds.

Thank you for any guidance!

@Slade Sizemore

I would not consider a 700 credit score low, average credit score is 710 (https://www.experian.com/blogs...). If you are moving into the property, I would suggest FHA financing as the best route because there is a low down payment. This financing is for 1-4 unit properties. Purchasing a $100k property will not require that much income either. The low down payment will allow you to have money for repairs and a reserve. Start with getting pre-approved.

@Slade Sizemore For "small multi-family" I'll assume 4 units or less at that price point. I'll also assume that you are purchasing this for an investment property and not a primary home. But if there's anything different let me know.  If your father can be the financer for the transaction (meaning the borrower).  Usually 25% down is good enough for an investment property of this nature.  Work with a lender who will use the rental income of the property to help you qualify and it should be pretty straight forward.  Feel free to ask anything additional if you need.  Thanks!

@Slade Sizemore oh, then if you are living in one of the units then different loan options would be available to you.  Please get with your father and get prequalified with a lender right away.  That way you know what you both will qualify for.  Thanks!

Hi Slade, congrats on the properties you own and excited for you in your next venture! If your purchasing as an investment property there are debt-service loans- basically if it will cash flow after your mortgage payment you could qualify. So no income docs needed. 

@Slade Sizemore -

If the property owner has experienced a great deal of appreciation, and claimed deprecation tax deductions along the way, receiving a lump sum of cash at sale without a new property to move to proceeds to (called a 1031 exchange), they'll be facing a painful tax bill.

For this reason, many sellers benefit from doing an installment sale, which allows them to defer the taxes they owe over many years.

More commonly, this is known as seller financing. In the scenario I described above, there can be great advantages for both you and the seller.