Starting Out On My First Rental Property - Single Family

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Starting Out On My First Rental Property - Single Family

Nick Hammen
Pomeroy, IA · Member since 2019 · 7 posts · 2 votes

Hey everyone, my name is Nick. I've very new to real estate, more specifically, single-family rental properties. I just became a pro member, and have been learning, attending webinars, reading book after book, and subscribing to real estate podcasts for about a year and a half now.

I am looking to complete an acquisition on my first official rental property by the end of next month. I've done my homework, ran it through various scenarios on the calculators on here, and have started the conversation with the realtor handling the seller's side of the sale. I have not walked through or proposed an offer yet. I am in the process of finding a good real estate agent to represent me before I proceed any further.

I am still researching options for financing to make sure I have that base covered for when I get to that point, but being in rural Iowa, sites like Rentometer don't work and alot of the mortgage options offered on here won't qualify it since the total loan would be under $30,000. I have excellent credit, so it's just finding the right financing and company at this point.

The house allegedly (haven't walked through or inspected yet) is move-in ready. For financing, is it better to take out a 2-year personal loan and refinance it after a year to a 30-year mortgage, or is it better to finance it with the mortgage directly? Any pros, cons, or pitfalls?

When/If I do offer on the property, I will be starting out at 75% of asking price with my own terms and contingencies, but based on inspection, I may raise my offer and request credit for repairs. Any strategy advise for this?

Happy to be in the community. I'm ready to dig in!

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Brandon Wells
Property Manager · Indianapolis, IN · Member since 2018 · 136 posts · 71 votes
7y

@Nick Hammen starting is always the toughest part. Good luck!

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  • Brandon Wells
    Property Manager · Indianapolis, IN · Member since 2018 · 136 posts · 71 votes
    7y

    @Nick Hammen starting is always the toughest part. Good luck!

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  • Dave Peirce
    Clive, IA · Member since 2019 · 38 posts · 23 votes
    7y

    Welcome.  Like Brandon said, starting out is the hard part.  And like you mentioned, not a ton of banks want to deal with loans of that size (due to the low income).  I'm not sure how rural you are, but you could try any local banks and credit unions.  If you really want to see who is making mortgages in the town, I would suggest either looking at the real estate records at the county recorder or signing up for an account at Iowa land records (which bundles all of the recorder's records in an online format).

    Honestly, I would probably just try to get a long term mortgage instead of a personal loan and then refi it down the road.  As if it doesn't need repairs (and you aren't doing value add), it is just another layer of fees you would have to pay (and the higher interest on the personal loan).  I mean, if you need to get the cash fast, and have good credit (and high credit card limits), you could do balance transfers (with 3-5% fees and hopefully a 0% rate for 12-18 months), which does skip the bank's underwriting.  However, you will still need a closing company/or RE lawyer. 

    As for increasing your price and asking for a credit for repairs, it depends on how much you are asking for.  As I wouldn't be surprised if the bank limits what sorts of credits and how much, as it can become a cash out refi (if too large).  But I really don't have any experience seeing large credits in the wild.

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  • Darson GranthamBusiness Member
    Realtor · Des Moines · Member since 2018 · 304 posts · 253 votes
    7y

    Welcome Nick!  I'm originally from small town SW Iowa and now active in Central Iowa specifically Des Moines. 

    Finding a good agent in a small town might be best to go visit the town and look for signs and see who has their face shown the most. :)  That being said, only get an agent IF you think you need one. I think on the buying side, it would be a 50/50 decision.

    Financing, I would start with the usual.  Local banks, credit unions would be first look.  Second look may be for you to look for a private investor.  For example someone with a Self Directed 401k may be happy to put their money to work as a mortgage getting 6-8% return or more depending on what you are looking for and what the private money may be looking for @Chad Carson has some great info about non-bank financing. 

    Either way finding the right financing up front would be ideal to eliminate double the closing costs. 

    Also, you mentioned a struggle to determine rents.  The best thing I've found for this is to reach out to a few people in the community or chamber of commerce and ask them where people in their community find properties available to rent.  They will be a great resource. 

    Good luck and feel free to DM me if you want someone to bounce ideas off of. 

    [email protected]515-612-6013
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