Closing on 1st property. What are the next steps for the 2nd?

1 Reply

BiggerPockets Community,

My wife and I just got our first home and are planning on house-hacking again in a year or so. The market that we're in is way too expensive so I'm looking into long-distance investing. I've listened to all of the long-distance episodes and I've been reading forums on it; however, I've yet to find one that addresses our situation.

If we are still in the process of closing on this property and are using a significant portion of our cash for the down payment and closing costs, how do I start preparing for another property? Preferably, I'd like to get one in the works ASAP, but I'm worried that I won't be able to get another loan from a lender/bank because out DTI ratio will be high now.

Is the next best step finding a private lender because a bank might not lend to me again? How do I go about finding a private lender? And once I do, is it best to gather the data on the property I want and present it to them via PowerPoint or something? I'd prefer not to go to family or close friends because of the potential fallout if things somehow go poorly or we don't agree on things. 

Also, how do I convince the individual that I'm giving the them a great deal if I don't know what kind of returns they're getting right now? It's hard to show that you're providing a great deal for them when you can't compare to the deals that they're currently getting.

Last question... What is a good 'rule-of-thumb' when deciding how much you offer in returns/percentages to private lenders? 

Any help/answers are greatly appreciated as I'm eager to get my second property in the works to help me and my wife achieve financial freedom and finally allow my wife to quit her job like she wants!

Thanks,

Tim R.

There's no reason you can't have this conversation with your current lender (unless things went badly.) Ask them how you are positioned relative to DTI for their lending standards. You may be surprised to find that your DTI is just fine to qualify you for another mortgage. If not, your lender may be able to advise you about what you need to do to get it in the right range. They'll also know of loan products that may suit your needs. If you don't want to find private money, use the relationship you already have to find out what your options are before disqualifying the conventional option. And if your lender turns you down, go to a local credit union or look for a portfolio lender in your area (usually a local bank) that may be willing to take into consideration the cash flow from the investment property rather than just your DTI. Bottom line: ask. Most of the lenders we've worked with over the years are more than happy to try to keep you as a customer if they can. Good luck!