Investor · Bethesda, MD · Member since 2012 · 80 posts · 3 votes
I am new to Real Estate Investment. I am looking at a possible deal. Purchase a property and use it for a rental (positive cash flow). I have a property in sight, and the numbers are working pretty good. The only issue is that I already own a house and to get the financing for the second is hard. From what I have seen so far there are three categories primary, second home( Far away, resort, beach....etc) or the last option which is investment.
I was looking to put around 5% down for the down payment but looks like I am leaning towards the third option which is investment which requires 20-25% down. Is there any way I could make my deal a second house and not go with investment option. I am sure its doable, but somehow I have to make the property appear not as an investment. Can anyone suggest any tips...Thanks
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
14y
Let me go back to your basic question. You're wanting to buy a rental property using owner-occupied financing. Spin it however you want, what you want to do is wrong. You're claiming to occupy a house when, in fact, you have no such intention. To get this loan, you will have to SIGN statements saying you're going to live there.
Further, there are very few loan programs that even let you buy a primary residence with 5% down. AFAIK, FHA with 3.5% down is the only such program. I'm not aware of any way to buy a secondary residence with only 5% down.
A more realistic suggestion is some sort of owner financing. Find an owner that will sell to you and carry a note.
Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes
14y
You're going to have a hard time getting a conventional loan for an investment property with only 5% down. You can try to "make" it whatever you want, but in the end it is what it is.
Two questions for you: 1) Do you intend to personally use (stay in) this property at all? And 2) How far away (in miles) will it be from your primary residence?
If you intend to personally stay in it, then MAYBE it could be a vacation home. If you intend to stay in it some times and rent it out other times, then it's going to be considered "mixed use" and you'll have to pro-rate your deductions. If you don't intend to stay in it but say that you will, then that's considered lying.
In regards to how far away it is from your primary residence, if it's in the same city (or very close to it), then it's not going to be considered a vacation home.
Investor · Bethesda, MD · Member since 2012 · 80 posts · 3 votes
14y
Thanks Kyle.. I was just thinking maybe I can buy the property on my Wife's name, meaning that she can say that she wants to buy the property. Basically the property would be her first house. The only issue is that she is a stay home mom but she does have good credit. I can be the co-signer, and then we can go with the 5% or little +-. If this works would the bank still look at me (the co-signer) as someone who owns a house and is co-signing. Do you think this can work. Please share your thoughts...Thanks.
SFR Investor · Orange County, CA · Member since 2009 · 1k+ posts · 1k+ votes
14y
Originally posted by Amir Saeed:
I was just thinking maybe I can buy the property on my Wife's name, meaning that she can say that she wants to buy the property. Basically the property would be her first house. The only issue is that she is a stay home mom but she does have good credit. I can be the co-signer, and then we can go with the 5% or little +-.
My wife and I did something similar a few years ago, but with some big differences. I already had several property notes under my name, but my wife had zero. Her credit score wasn't as high as mine, but her income was good, so she applied to purchase the rental property all on her own and got approved.
Not sure how it would work with a no-income primary borrower, but it's a good question.
Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes
14y
Originally posted by Amir Saeed:
Thanks Kyle.. I was just thinking maybe I can buy the property on my Wife's name, meaning that she can say that she wants to buy the property. Basically the property would be her first house. The only issue is that she is a stay home mom but she does have good credit. I can be the co-signer, and then we can go with the 5% or little +-. If this works would the bank still look at me (the co-signer) as someone who owns a house and is co-signing. Do you think this can work. Please share your thoughts...Thanks.
It's creative, but it won't work. Even with good credit, there's no way your wife will qualify on her own with no income. So you'll have to apply jointly with her. Plus, even if she did have an income and could qualify on her own, she'd have to falsify the part where she states that she intends to occupy the home as her primary residence. Not a good idea to lie.
You can still get really good interest rates right now even on investment properties. Granted, you'll have to save up for a bigger down payment, but aside from that you can get rates in the low 4%'s. Maybe just try to save up some more so you can take advantage of these killer rates. Or do like some people and wholesale a few deals until you get the cash built up.
Specialist · Boca Raton, FL · Member since 2011 · 113 posts · 39 votes
14y
Amir Saeed what if you asked the seller to hold a second mortgage for the additional 15% down. A community bank may allow you to go to a higher combined loan to value given that their exposure is limited to 80LTV. It is something worth thinking about in order to see if you can make the deal work.
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
14y
Let me go back to your basic question. You're wanting to buy a rental property using owner-occupied financing. Spin it however you want, what you want to do is wrong. You're claiming to occupy a house when, in fact, you have no such intention. To get this loan, you will have to SIGN statements saying you're going to live there.
Further, there are very few loan programs that even let you buy a primary residence with 5% down. AFAIK, FHA with 3.5% down is the only such program. I'm not aware of any way to buy a secondary residence with only 5% down.
A more realistic suggestion is some sort of owner financing. Find an owner that will sell to you and carry a note.
Investor · Hampton Bays, NY · Member since 2009 · 907 posts · 258 votes
14y
Amir Saeed unless you are ready to rent your current home and move into the rental any device you come up with will be some form of fraud. Not a good way to enter a business that offers plenty of honest opportunity. Have you considered a home equity line of credit on your primary residence? Would your current income support both the mortgage on your home and the new rental property?