Cleveland Ohio, A New Person

11 Replies

My name is Robert Mitchener, and I've been looking into real estate for a few months off and on, and in too many places to be honest. I've contacted multiple traditional lenders for information, and requested funding from them for some ideas I've had, all with the result of learning more without getting anywhere. I have two goals in mind; One, to become more proficient at finding and financing real estate deals for investment property. While this means that I may need to simply get more money to start out and maybe change my strategy, I do want to start owning a property sooner rather than later, having it and myself pay it off over 10 or 20 years instead of waiting that long to save enough money for a traditional mortgage and then spend 10 or 20 years paying it off after that. Two, I want to eventually become a private money lender, and help people like myself with good ideas get their hands on the property quickly instead of waiting even if they aren't making or saving incredible amounts of money. I'd like to be able to finance deals like Divvy Homes where I would purchase the property outright, and the borrower would simply pay like a rent-to-own property until they've paid it off, just without the minimum $1,000 in payments every month.

Perhaps I am thinking above my means, and I simply need to save money, purchase an owner-occupied property, improve it, then rent it out once it is paid off. My first post I made here was looking for information on turnkey styled investment property ownership and how to get money to fund those. I think for now I will be looking a lot more than actively trying to find something that will work.

Originally posted by @Robert Mitchener :

My name is Robert Mitchener, and I've been looking into real estate for a few months off and on, and in too many places to be honest. I've contacted multiple traditional lenders for information, and requested funding from them for some ideas I've had, all with the result of learning more without getting anywhere. I have two goals in mind; One, to become more proficient at finding and financing real estate deals for investment property. While this means that I may need to simply get more money to start out and maybe change my strategy, I do want to start owning a property sooner rather than later, having it and myself pay it off over 10 or 20 years instead of waiting that long to save enough money for a traditional mortgage and then spend 10 or 20 years paying it off after that. Two, I want to eventually become a private money lender, and help people like myself with good ideas get their hands on the property quickly instead of waiting even if they aren't making or saving incredible amounts of money. I'd like to be able to finance deals like Divvy Homes where I would purchase the property outright, and the borrower would simply pay like a rent-to-own property until they've paid it off, just without the minimum $1,000 in payments every month.

Perhaps I am thinking above my means, and I simply need to save money, purchase an owner-occupied property, improve it, then rent it out once it is paid off. My first post I made here was looking for information on turnkey styled investment property ownership and how to get money to fund those. I think for now I will be looking a lot more than actively trying to find something that will work.

 Little confused by your post. What is the roadblock stopping you from getting your 1st rental property? You only need 25% down and it looks like you're targeting Cleveland so that means you can be in a rental for under $20,000 cash fairly easily. Also since you are targeting Cleveland I figured I'd drop you a link to The Ultimate Guide to Grading Cleveland Neighborhoods. Should help you get a lay of the land.

Originally posted by @Robert Mitchener :

My name is Robert Mitchener, and I've been looking into real estate for a few months off and on, and in too many places to be honest. I've contacted multiple traditional lenders for information, and requested funding from them for some ideas I've had, all with the result of learning more without getting anywhere. I have two goals in mind; One, to become more proficient at finding and financing real estate deals for investment property. While this means that I may need to simply get more money to start out and maybe change my strategy, I do want to start owning a property sooner rather than later, having it and myself pay it off over 10 or 20 years instead of waiting that long to save enough money for a traditional mortgage and then spend 10 or 20 years paying it off after that. Two, I want to eventually become a private money lender, and help people like myself with good ideas get their hands on the property quickly instead of waiting even if they aren't making or saving incredible amounts of money. I'd like to be able to finance deals like Divvy Homes where I would purchase the property outright, and the borrower would simply pay like a rent-to-own property until they've paid it off, just without the minimum $1,000 in payments every month.

Perhaps I am thinking above my means, and I simply need to save money, purchase an owner-occupied property, improve it, then rent it out once it is paid off. My first post I made here was looking for information on turnkey styled investment property ownership and how to get money to fund those. I think for now I will be looking a lot more than actively trying to find something that will work.

 Cleveland is a great place to get started! Tons of properties here that are less than $100k and rent for well over $1,000. Good luck to you! 

Originally posted by @Robert Mitchener :

My name is Robert Mitchener, and I've been looking into real estate for a few months off and on, and in too many places to be honest. I've contacted multiple traditional lenders for information, and requested funding from them for some ideas I've had, all with the result of learning more without getting anywhere. I have two goals in mind; One, to become more proficient at finding and financing real estate deals for investment property. While this means that I may need to simply get more money to start out and maybe change my strategy, I do want to start owning a property sooner rather than later, having it and myself pay it off over 10 or 20 years instead of waiting that long to save enough money for a traditional mortgage and then spend 10 or 20 years paying it off after that. Two, I want to eventually become a private money lender, and help people like myself with good ideas get their hands on the property quickly instead of waiting even if they aren't making or saving incredible amounts of money. I'd like to be able to finance deals like Divvy Homes where I would purchase the property outright, and the borrower would simply pay like a rent-to-own property until they've paid it off, just without the minimum $1,000 in payments every month.

Perhaps I am thinking above my means, and I simply need to save money, purchase an owner-occupied property, improve it, then rent it out once it is paid off. My first post I made here was looking for information on turnkey styled investment property ownership and how to get money to fund those. I think for now I will be looking a lot more than actively trying to find something that will work.

Based on your post I believe that you have been looking around for a little while and learning a lot about real estate investing but you haven't taken the next step. I think the best location for you to start at would be Cleveland, because of the high demand for rent and the low price range for houses around the area. As a first step I would take a look at the Cleveland Price & Neighborhood Map. It would give you a good idea about the grades and the neighborhood in the Cleveland market. Good luck !!

 

Welcome to BiggerPockets! Truly nice to meet you. Good luck going forward! 😁 Leverage differ lending options. Would you be able to house hack with FHA? @David Greene had a great webinar on buying multi family properties. Hope the best for you going forward!

It sounds like you're really overthinking this. If you can qualify for a traditional mortgage then that's usually the best way to start out. You can go get a 15% down conventional rental property loan for a single-family home. You can get something pretty respectable for $75-100k that will rent for $1100. 

Forget about the private money lending, creative financing, and payoff schedules for now. Just go talk to more banks, get approved, and buy something!

@Robert Mitchener

Welcome to Bigger Pockets!

This is a great place to learn and network. A lot of forum members are very knowledgeable in their respective fields related to real estate investing, whether that is real estate sales, wholesaling, flipping, rentals, lending, self-directed IRA and Solo 401k investing, or tax and legal guidance.

The site has quite a few tools that can be helpful for new members. I like the search features: https://www.biggerpockets.com/search

Alerts can be really helpful too: http://www.biggerpockets.com/alerts

There are a few self-contained guides that you can access here: https://www.biggerpockets.com/guides

@James Wise There appear to be several; the first is low savings, where $9,000 out of my current $12,000 is borrowed. Most lenders I have contacted have told me that I cannot use borrowed money for a down payment. The second is my debt to income ratio, which if I paid off all debts I'd have $3,000 saved up that I could use, and over half of that is in Fundrise's portfolio which takes a while to withdraw from. I have a few plans to save money up now that I'm looking closer at it, but that will take some time because of the third hurtle; I work 5 hours a day and enjoy my free time too much to take on another job, though I have been looking at freelancing. Thanks for the link! I will look into that tonight.

@Tom Ott Thank you!

@Ben Halabi Thanks, I will certainly look at that. Will be a very helpful resource.

@Anthoney Hanks I would certainly be able to house hack with FHA, although I know how picky I can be when it comes to where I live and moving around a lot doesn't sound like something I'd like to do (I like to settle for 10 years or more in one place). It is certainly a possibility though, I don't want to just straight up close off any one strategy, though it's more than just me, and I have to appease who I live with too. I will take a look for that webinar!

@Ryan Evans I may have to talk to more banks, because Citizen's Bank's loan officer told me their requirements were 25% down and no borrowed money (see my answer to James Wise at the top of this reply) and that $64,000 was too low for them to fund even if I did have the $16,000 down payment on something that was $80,000. I can certainly find a way to field a down-payment one way or another, probably up to about $20,000, but I feel like a lot of traditional lenders are not going to like anything below that, or how I get that money. Since most banks are have very strict lending guidelines, I didn't think it would be the best idea to waste my time finding loan officers at each one to try and find the one that might on the off-chance be able to do what I was looking for; in your experience have traditional loan terms varied widely from one bank to another?

@Justin Windham Thanks for the links; I will be looking into a lot more information in the coming months, and as Negan has repeatedly said, "People are a resource."

@Brian Garlington My response to James Wise at the top of this reply has most of it; borrowed money for the down payment, low mortgage loan amount, debt to income ratio too high. I have all my financials well in hand, but I understand their desire to ensure if the property itself fails (although it should be self-sufficient), I would be able to repay them what is owed.

Originally posted by @Robert Mitchener :

@James Wise There appear to be several; the first is low savings, where $9,000 out of my current $12,000 is borrowed. Most lenders I have contacted have told me that I cannot use borrowed money for a down payment. The second is my debt to income ratio, which if I paid off all debts I'd have $3,000 saved up that I could use, and over half of that is in Fundrise's portfolio which takes a while to withdraw from. I have a few plans to save money up now that I'm looking closer at it, but that will take some time because of the third hurtle; I work 5 hours a day and enjoy my free time too much to take on another job, though I have been looking at freelancing. Thanks for the link! I will look into that tonight.

@Tom Ott Thank you!

@Ben Halabi Thanks, I will certainly look at that. Will be a very helpful resource.

@Anthoney Hanks I would certainly be able to house hack with FHA, although I know how picky I can be when it comes to where I live and moving around a lot doesn't sound like something I'd like to do (I like to settle for 10 years or more in one place). It is certainly a possibility though, I don't want to just straight up close off any one strategy, though it's more than just me, and I have to appease who I live with too. I will take a look for that webinar!

@Ryan Evans I may have to talk to more banks, because Citizen's Bank's loan officer told me their requirements were 25% down and no borrowed money (see my answer to James Wise at the top of this reply) and that $64,000 was too low for them to fund even if I did have the $16,000 down payment on something that was $80,000. I can certainly find a way to field a down-payment one way or another, probably up to about $20,000, but I feel like a lot of traditional lenders are not going to like anything below that, or how I get that money. Since most banks are have very strict lending guidelines, I didn't think it would be the best idea to waste my time finding loan officers at each one to try and find the one that might on the off-chance be able to do what I was looking for; in your experience have traditional loan terms varied widely from one bank to another?

@Justin Windham Thanks for the links; I will be looking into a lot more information in the coming months, and as Negan has repeatedly said, "People are a resource."

@Brian Garlington My response to James Wise at the top of this reply has most of it; borrowed money for the down payment, low mortgage loan amount, debt to income ratio too high. I have all my financials well in hand, but I understand their desire to ensure if the property itself fails (although it should be self-sufficient), I would be able to repay them what is owed.

 Work more. Save the money and get started. It's really that simple.

@James Wise It really is that simple. Personal preference has been to coast by relatively comfortably at $26k annually pre-tax and then just buy what I want when I want it. Don't have a lot to show for it after 5 years. I may just have to pick up some more work and save all of that income until I can use it, and if it comes to that so be it. Eventually I want to help people that are in my situation, like with what Divvy does, by purchasing the home for them and having them live in it while they pay it off, but with a lot less required monthly (Divvy's minimum is $1k per month) and not as much return for myself (I want to help them, not hurt them). Perhaps that will ultimately be unrealistic, and I may only be able to do a few at a time 20 years from now, but I don't like seeing people start where I am and not have better options.

@Robert Mitchener My business partner has bought a couple of SFR's through citizens bank with 15% down as rental properties so your loan officer is misinformed. I was the broker on one of them. One of those was for a $33k purchase price. That said, that deal prompted their branch to change their loan minimums as it was the lowest price transaction they did that year. But it didn't go up all that much.

There are going to be consistent standards among conforming loans, but you shouldn't limit yourself to just those. And if you think it's a waste of time finding a reliable lender than you're missing the big picture. Having a go-to lender is one of the few key pieces you need in this business and you have plenty of time on your hands to find one. It's a tough game and if you're not willing to work to make it happen then it just won't happen. 

I don't have access to conventional financing because I've moved around and had a very unstable income, but I've bought ten units in the last few years by getting creative and grinding it out because that's what it takes. 

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you