Exhaust my conventional mortgage loans first then do hard lending

9 Replies

After I close on my first rental property in late Jan 2021 and fill it with a tenant/lease agreement, I will have about $70k cash left to play with to buy more properties. However, I want to do all my homework and seek all the options out there to not hit a roadblock down the road for financing upcoming investment properties.

Do I continue using my normal (20% downpayment requirement) Fannie/Freddie backed conventional mortgage loans with the banks first and then when I cant qualify for more conventional bank loans, do I need to start seeking private hard money lenders?

Remember, I do have $70k cash available to use and I dont want to hit a wall where I can no longer buy more properties.

You can buy up to 10 properties before you exhaust. Maybe not from the same bank. Remember you need keep reserves for emergencies and most banks require 3-6 months reserved per property when financing. 

@Kevin Lanphear

1) you’re not going to get near 10 loans with $70k

1) if you do get to 10 loans, you can get commercial or portfolio loans from local banks....20-25 year amortization, 5 years or so balloon/refi requirement. 

@Wayne Brooks exactly, yeah after my 3rd door ill be exhausted with my own cash.... I can do a cash out refinance from #1 or #2 (but thatll be in a year or so at least).... until then, ill just have to do private lending or find a partner?

I had a mentor tell me one time to "just focus on what the next move is".  While we all need to do long range planning the rules for loans may change in 6 months, 6 years or tomorrow.  One thing I wish someone had told me the first year of investing was to not be so aggressive in my tax write offs. I was so excited being in RE Investing and starting the business that we aggressively wrote off everything we could.  We sheltered $25k in W-2 Income (which you can only do if your MAGI is under $100,000) by buying stuff for the business, doing repairs on our first rental, paying points at closing ETC...  Because of the loss the next loan we went for the bank added $2083/mo. to my debt to income (25k/12).  That effectively closed the bank for 12 months to us.

I say this, because we don't know what we don't know.  Your goal right now should be to get the place you are closing on in January closed, rented and stable.  Next would be to get into the next property while preserving as much of your capital as you can.  If you buy it, fix it up and Refi to get money out the bank may want to see a 6 month seasoning before making that loan.  If you can find a distressed seller that needs to sell and can get a place for 80-85 cents on the dollar and put 20% down in should cashflow like a monster.  

@Kevin Lanphear

Kevin,

I am in the Alpharetta area looking for a partner to do a few SFH BRRRR deals. Have good vendor/contractors. Need a partner that has some funds and is willing to jump in with me!

We should get coffee and talk about how to keep our money washing in some BRRRR deals in early 2021!

If you want it to be a machine where you keep pulling out $$ to put into the next deal then maybe consider doing some BRRRR deals.