Brand new to the forum and also a brand new investor. Just bought my first buy and hold property in Dover, NH last September 2020 and really had no intention of continuing to invest beyond that. My girlfriend and I were looking to purchase our first home and buying a duplex seemed like a great way to offset our mortgage payment. As soon as we got settled in and got that first rent payment from our tenants, I really started to see the bigger picture with this buy and hold strategy. It took a little convincing but my girlfriend came around and she agreed this would be a good move for us going forward.Creating this cash flow every month would really push us in the direction of attaining the goal of financial freedom.
Fast forward to now and I've pretty much been splitting up all my time outside of work between fixing up our duplex and learning as much as I possibly can about REI. I know I still have a lot to learn but it also feels like that next property can't come soon enough.
We financed our current duplex with an FHA loan. As far as that next property goes, we don't really have enough capital at this point for a conventional loan with a 20% down payment and I'm wondering what our other options are as far as financing. I know there is hard money/private lending, but not sure it's the best move for us as new investors with little experience. We're also open to moving into what would be the next property as well as soon as the 1 year of residency is up for the FHA loan. Any tips for my next steps would be greatly appreciated!
Congrats on your purchase! I strongly recommend you read Set for Life by Scott Trench. The best move you could make to build wealth is to move into another duplex, triplex, or 4 unit and live in one of the units. You'll keep your first investment and only need to put down 5% on the next investment since you will be living in it (I don't believe you can have two FHA loans at same time). But you can put 5% down with a conventional loan.
Thanks Mike! Set For Life is on my list! I was under the impression that the minimum down payment even as an owner occupied would be 15% so I’ll have to look into that.
@Cameron Rafford Welcome to the REI game!
I agree with @Mike Street , Set For Life is an awesome book.
Some ideas to consider:
-Cash out refi on your duplex to provide down payment for another property
-Use an FHA or conventional loan for your next primary residence, many lenders will let you do 3.5-5% down
-For your next primary residence, try to get a 4 plex. It offers even more rental income and will still count as a primary residence for conventional loans
Best of luck!
One more option to consider is Private Money Lenders (these are different than Hard Money Lenders by the way), and although the best down I have seen is 10%, they tend to be bit more flexible in their terms, and sometimes there are ways around the down payment actually having to come out of your own pocket. Just another suggestion to add to your options. If you want to hear more about them feel free to reach out, I can give you all the details or information I mean.
@Zander Kempf cash out refinance is definitely on the table, just have to wait 210 days from purchase date I believe due to it being FHA. Love the idea of a 3 or 4 family for our next place. Thanks for the advice!
@Robin Hopkins thanks Robin, I’d love to hear more about private lending. A little skeptical being a new investor and tying up somebody else’s money but I need to do more research
@Dmitriy Fomichenko thanks for the welcome! Always seem to have a BP podcast on while I’m driving nowadays
@Cameron Rafford the FHA loan requires that, at the time of closing, you "intend" to live in the house for a year. No one is checking a timer on the exact number of days that you're living there. There is no prepay penalty so you could do a refi whenever you wanted. On the other hand, a rental property type loan will have a higher interest rate, so depending on how much cash you can pull out and how long you intent to hold the property, it may make more sense to keep the loan.
@Zander Kempf Interesting, I’ll have to look into that more. Thanks