I have two rentals, both acquired through house hacking. I live in Austin, TX. Market has been hot for years now. Although, I can still cash flow in some areas, my money is tied up in other investments and liquidity that I need to maintain for two other properties. We like where we live so don't want to turn our home into a rental. I checked with lot of lenders, but none willing to finance without 20% down payment. Anyone out there in my scenario or can anyone provide some insight?
@Darshil Parikh why can't you move into another owner occupied home and move back in a year when the lease is up?
@Jordan Moorhead I have thought about that, but where we live is close to work for my wife and I. There is nothing under $600K where we live (central austin), and I won't be able to cash flow renting our current house.
@Darshil Parikh would you break even for a year and then be able to move back in? How many bedrooms is your current house? You can do a lot if you're willing to take some risks and be temporarily uncomfortable by living in a house that would work as an investment.
@Jordan Moorhead Thanks for your comment, I have been thinking about it. I am all about uncomfort as long as it can turn comfortable in the long run.
Other options may be:
1) hard money loans
2) Seller financed deals
@Neil Narayan I am not into hard money, they are quite expensive. I have a buy and hold strategy. I am also having hard time finding seller financed deals. PM if you have a good hard money lender or seller financed deals.
With HML the IR is related to the risk, if you build credibility with a lender and get creative on the terms you can get a decent rate e.g. I did a 6% HML with 2 yr balloon where the lender knew that i was good for it.
I see more owner financed deals in SA than ATX but you still do see some here. I purchased one that was Seller financed.
Question. How are the properties held currently? Why can you not just refinance them with a standard conforming loan and use the current equity?
@Mike Bonn not enough equity for a cash out.
Ok. You are looking to cash out over rate and term. What are the numbers on the property? I may be able to steer you in the right direction. Amount owed, value and amount of loan you are looking for?
@Darshil Parikh we have acquired a bunch of properties with conventional financing and 20% down is the requirement for investment properties. If I recall, after four properties, it changed to 25% down.
There is also a cash reserves requirement. They want to see 6 months PITIA and a percentage of outstanding principal in reserves. I think once you get over eight, it is 6% of outstanding principal, but they let you use retirement accounts as reserve money so that can help.
You can look at commercial loans, but they will likely have the 20% requirement and have higher interest rates plus not be locked in for 30 years.
Another option is taking a HELOC against equity on one of your properties and use that to fund the down payment.
I see a lot of success from people who buy, fix, rent and then refi. They acquire with a fix and flip loan up to 90% of the purchase and 100% of repair costs. They create equity and then refi to 75% of new value with a conventional lender. There are options out there. Feel free to message me and I can help.
@Darshil Parikh you may be able to offer the equity in both properties as collateral for a down payment. In that scenario, combining your equity with the two house plus any money you’d be able to provide, could get you to 20%.
I’m trying something similar in my neck of the woods in Indiana. Maybe that could work in your situation.