Investment property loan

5 Replies

I’m a homeowner in California, just starting to think about an investment property in Orlando, or other market in Florida or Texas. 

My question is with an investment property loan I've heard the banks typically want 30% down, is this rumor true? Is there a way to do this with little down, like with an FHA loan? My current loan is conventional, my house prior was FHA but i sold it.

Another question: I’m considering a rental property that’s in the $200k to $250k range. However I’ve noticed some properties that are $70k only. These are tiny, and likely need work. But would something cheap like this be a wise first investment move, to get my feet wet? Or is it a waste of time and energy for little return? 

Thx

You can buy investment properties with 20 percent down, typically these are single family.

To use fha or a similar loan you have to live in it

Hi @Dexter Knox

My understanding is that you can get a loan for an investment property with 20% down, but you will likely have to show some reserve for 6 months of mortgage payment including taxes and insurance.

As for understanding if it is worth it or not, you have to look at the numbers. Two $70k plus repairs properties might have a better return than a single $200k property.

As for time and energy management, your first property will be your most difficult because there is a lot to learn. I would recommend you read the “Long-distance real estate investing” book by David Greene. I think this will give you most of the answers you are looking for.

Jonathan R

If you rehab you could do a hard money loan to a perm loan and on the right property you wont pay a dime down and have instant equity. 

The second question is really dependent on the market. In my market $200k+ is the comfort zone.

Hard money is a short term loan. Interest is high, typically 15% +/-. But based on the "after repaired value" of the property. And may fund rehab. So, the BRRR strategy - buy, rehab, rent, refi - is to buy a junky property with a hard money loan, fix it up, get it rented, then refinance into a long term, usually conventional, loan. Now, you will still need cash of your own. But if you can find the right property, you may be able to get into it with less cash than buying straight up with a conventional loan and 20% down. It may also let you buy a property that's too junky for conventional financing. And you can often get some of your cash back on the refi. Search for BRRR and you'll find lots of discussion about that here.