Hello fellow BP Members,
Newbie investor here, gearing up to purchase my first property in Austin, Tx (Round Rock, Pflugerville, Cedar Park area) within the next 4 months. I was interested in any recommendations on smaller region banks that are investor friendly. I currently bank with a national credit union and was interested to know if building a relationship locally is more advantageous in this step of my journey.
Our first property will be a SFH the following another SFH or small multi-family (if the numbers work) and then scale from there (I have decided on the buy and hold strategy). I have enough capital for a standard 20% downpayment but I am interested or open in any FHA programs.
(couldn't locate a thread on this so I thought create one-any help is appreciated)
@Nicole Vessells Congrats on gearing up to make your first purchase!
If you are planning on living in the home for a year, there is a Home Style loan that I'd recommend looking into; think 204K FHA loan but as a conventional loan instead. This allows you to put only 5% down, have your rehab costs covered as a part of the loan, and not need to refi down the road to get away from PMI when you cross the 20% equity threshold.
I would certainly make sure that I held cash reserves to be able to pay any contractors promptly because the draw system here takes longer than most (comparing against hard money lenders), and your contractors want to be paid. The lender will give you the option to pay the contractor directly but this is going to be a headache in itself as they have to conform to the lender's payment request system and timing. SO MUCH easier if the lender is just set to pay you back for work completed.
Side note: you say this is your first property so I'll remind you that the only leverage you really have at the end of the day with most contractors is the amount of money that you have not paid them yet. Make sure that there is a sizeable payout for them AFTER completion.
Are you planning to buy turn key, or is rehab going to be necessary? Finding a local lender could potentially help, it never hurts to shop around a little bit to see what different lenders have to offer. Keep in mind taxes in the area when calculating cash flow as well. Texas taxes can sometimes be hefty.
@Aaron Signer 's advice is very good if you're looking at rehab, which I'm guessing you are.
Also, based on some of the details in your post, I'm gathering that you're planning on living in each property for a year and they will be conforming properties. In this situation they're all essentially "investor friendly". They just sell your loan on the secondary market as soon as it closes. If you end up buying non-conforming properties or are not planning on occupying them, expect to put down more like 25%, and obviously FHA would be off the table.
One thing I always like to recommend: talk to a place that doesn't pay commissions to their loan officers (most credit unions), and use their rate to shop around. They almost always offer the lowest rates, but I've found that the service is often a bit lacking, since they don't really care that much if your loan goes through. If you can find a commission-based loan officer to match their rates, you can get the best of both worlds.
That said, I've worked with all kinds of lenders; PM me what you're actually looking for and I'll be happy to share contacts of some of the ones I've had the best experiences with.
Thank you so much, these are great callouts! I have been reading about the 204K FHA loan and I agree that this is great information to explore with potential lenders on. Did you have any rec's on local lenders in the Austin area?
Hi @NickMarron I am interested in a property that will require some minor rehab (Cosmetic, new siding, kitchen renovations, new countertops and state-of-the-art appliance etc). Hoping to capture some value add and force appreciation.
Thank you for the note on taxes, I notice they are quite high in different around Austin. :)
@Jacob Pereira Thank you for the tips! I will definitely PM for some recommendations Thank you so much!
@Nicole Vessells , Hold UP! Stop the PRESS, NOW! Whew, I'm afraid you were just about to make a MISTAKE. Let's review what we have and what we want and THEN FORM An Action Plan.
What we Have: Your words not mine "Our first property will be a SFH the following another SFH or small multi-family (if the numbers work) and then scale from there (I have decided on the buy and hold strategy). I have enough capital for a standard 20% downpayment but I am interested or open in any FHA programs."
Ok let's dissect this FIRST! 1st property SFH. Why? Give me the why? BUT before you give me your answer if it emotional based or for personal reasons then you are on the wrong message board!!!! Give me reasons as to how it supports your investment goal: buy and hold strategy. What do you want to achieve with your Buy and Hold stategy? Let me know your expectations concerning CASH FLOW. You, Then go on to say my next property will be SFH or duplex......What? To loosey goosey for me! Which property type supports your Buy and Hold property BEST?????
You have enough downpayment to put down 20%???? What does that mean? If the property is 1 million you have $200k to put down???? Come on, I need more SPECIFIC INFORMATION. What purchase price are you targeting for your first investment. Where are you living now, and how much is your rent?
The least of your concerns at this time is where to get my financing. If you put down 20% on an owner occupied property why go FHA? I want you to re-think your strategy. Write out your goal. Keep asking your self WHY? Get your why locked in! Let me give you an example how to refine your goal"
Beginning Goal: I want a buy real estate
Why do you want to buy real estate?
So I can make money.
So I can feel good and do what I want to do?
Why do you want to feel good and do what you want?
So that I can Not be dependent on _________, So that I can quit my crappy job_______, So that I can quit living paycheck to paycheck, So I can stay home with ___________, So I can someday be financial independent, So that I can do what I want to do when I want to do it.
Now as you go through this process, hopefully you will become convicted to your WHY.
For Me here is my Goal and Why. (The Why is more important than the Goal).
Goal: To invest in Investment Real Estate using a buy and hold strategy.
My Why: So that I can generate Predictable, Sustainable Income that will allow me to retire (I'm 65 now) and live at a HIGH standard of living with no fear of running out of money during my lifetime.
Once we have this they we ask ourself which property should I buy? Which property best fills and supports my WHY.
Once you do this then tell me why you want to buy the SFH first. Cheers.
@Nicole Vessells I'm with @Joe Scaparra . I'd buy the multifamily househack with 3.5% down first, then look for a 5% down SFH with an ADU or a SFH that you can build an ADU on and then cashflow off of. Also find a good mortgage broker, you don't need a local bank to do these types of loans. They sell them off just like everyone else.
Thank you for taking the time to respond to my thread, I’ve seen you post around the forums and you have a wonderful insight on topics that I’ve seen discussed. I will respond in order of your thoughts!
My why for SFH first is that we want to take advantage of the appreciation in the area we are investing in. This approach may be advantageous with my goal of building long term equity to create generational wealth. Secondly I am relocating from California to Texas with my company, so I'll be working full time and my fiancé is moving his business here, all while learning about being a first time homeowner, hiring contractors and rehabbing a house, and how to be a landlord (we plan to manage the first few properties ourselves to reduce Expenses). I feel that during the transition in the next 12/mo once the property is purchased, the smart route is to take that time and build our processes so that we can scale efficiently.
Perhaps I worded this poorly regarding my ability to pay 20%. I simply meant that within our price range I have the ability to pay a standard downpayment if need be. Thus exhibiting my flexibility with lender options. Currently looking in the 300K and lower range. Also I live in SF and my rent is currently around 2.3k to answer your question. :)
Thank you for sharing your why Joe, this is very helpful. When thinking about my why, building generational wealth is the heart of why I am taking leap into investing in real estate. I like my job (my partner/fiancé) loves his business, we do not plan on quitting anytime soon. Love to know any additional thoughts you may have :)