Originally posted by @Rory Kinnear:
Originally posted by @Ciprian L.:
The income from the extra units can help you with financing.
With all due respect, this seems completely incorrect. Without a track record of investment income (this will be my first property), no lender I've spoken too from will consider future income from the property when calculating how much they will lend right now, they have both said they can only look at the income I currently have. So as I said, I'm looking for advice on neighborhoods with properties under 600k. At the risk of being rude you're advice about getting 2-4 units is just plain unhelpful and misleading.
Hello Rory,
Your comment was so rife with problems, that it inspired me to create an account just to give you a little bit of information and hopefully help anybody stumbling upon this thread to not have the same close-minded, negative investing thought process you displayed in your response to Ciprian.
#1 Ciprian is right. If you are purchasing a 2 to 4 unit building and the other units have a history of proven income, you can use that income to help you get into the deal. If you are getting pushback from a conventional lender, you need to find another lender.
#2 You thinking that it's not possible to find duplexes, triplexes, or quadplexes in your price range is exactly why people like me find them and have less competition when buying them. I don't know what you are using for your real estate searches or what you're putting in your queries, but it took less than 60 seconds to see that 4 different multi-family properties sold in your price range in Burbank within the last 6 months. Two of them sold for less than $551,000, well within your price range. So before you try to scold somebody on what is and what is not available, please put in a little effort first.
#3 Based on your numbers mentioned, you have approximately $400,000 in cash to put down on a $600,000 on a SFR property just so you can get a conventional loan. Having that available cash is good, but if that's the case, I don't understand your investment thesis. You are cash rich but income poor, but if you leverage your $400k properly, you can solve your income problem.
Look, I get it. This is your first time so you don't have any real world strategies to go off of. Here is a simple one to think about. Hard money. If you're not familiar, search the web or this site.
Basically putting 35% down seems to be the magic number where hard money lenders will throw cash at you as long as you are buying the right property at the right price. They won't care about your income. Sticking with your $600,000 budget means that you would only have to put $210,000 into the deal. You would get a 2 to 4 year loan with the target of around 9% interest with no prepayment penalty after 12 months. That would leave you with almost another $200,000 in cash reserves to make improvements and cover your interest payments.
Here's the fun part. Once you've purchased the property and can show rental income for a year or two, even those previous lenders who said they would not count rental income will now have to count it. Then you refinance out of the hard money loan. With the rental income and minimum 35% equity in the deal, refinancing should be a cake walk for you qualifying. Best part is you still have the extra $200,000 in your pocket that you never had to spend for the down payment.
These are broad strokes but hopefully you understand the concept enough to get more details. The bottom line is a person in your financial situation has a lot more options than you seemed to be aware of. Good luck.
Best,
Gregory
