All Forum Posts by: Heather D.

Hi Tod,
I've thought about it... but haven't done much research on how that would work. But you don't live too far away! :)

I appreciate your input Joe. Getting to this place where I'm free of all debt except for my home, rent house and car has been a long road but I'm nearly there. After major medical issues, a number of hospital stays and unemployment at the same time it's a big deal to me to have paid back all of my family, paid off the IRS and my credit cards. I don't plan to pay off my car... I just see that as a living expense.

I dont have to cash out the 401K... I could take a loan against the vested balance and use that... but the interest is around 7% and that seems a lot to swallow right now.

I looked at hard money because I understood it took the least cash out of pocket. My credit score is low-to-mid 700s. I have a decent amount of disposable income that I've been putting towards other debt but that's almost gone... so I could reasonably expect to put away another 10K by the end of the year if that's my only route.

So I'm hearing that some of the smaller community banks are starting to do more lending again... not sure if they will look at real estate investment but I've considered approaching a few of the smaller banks in my area.

I really appreciate this dialog... thank you.

One more thing... Rich, you're correct... lack of money is my biggest hurdle right now and I'm trying to figure out how to make do with what I have... I guess I should have started my original post with that statement.

Thanks for responses. I do have cash to cover closing. I plan on turning my purchase into a rental. The hard money lender I've been talking to converts the hard money loan to conventional financing after any rehab -- but you don't have to have rehab as part of the deal. This is all dependent on me and how quickly I complete any rehab... but once the appraisal comes in on the rehab they convert to conventional in less than 20 days.... so there is a second closing but those closing costs can be rolled into the perm financing.

Is this not a typical practice... or is there a catch?

Thanks again for your insight!

Where to start -- I'm a newbie when it comes to actually applying all the information I've pounded into my head about real estate over the last decade. Finally got the stars all lined up to leap off the cliff and do something and now I'm getting anxious about the financing and questioning myself over and over again.

I'm trying to stay with what I'm comfortable with at first so I can build more experience before adding different twists to the mix. I'm targeting a "cookie cutter" rent house - less than 10 years old, under 1500 sq ft, 3/2/2. I've found a number of listings in my area that fit my requirements as well as my target price and market rents. I think I have all my ducks in a row but I'm anxious about the financing route.

I have one rent house that I bought 5 years ago as my primary residence then later converted to a rental. I owe about $73K on it with a market value of ~$105K -- not enough equity to really do anything. However, I've got a vested balance in my 401K of ~$40K.

I was thinking of going through a hard-money lender which will require me to draw the money out of my 401K to serve as a cash reserve.

OR should I try to do a few small flips to build up some $$?

OR should I target a cheaper property for my first few rentals... ?

I have to believe the first deal is the hardest... because I know I'm likely making something out of nothing.

Thanks for reading through all my anxious rambling!!!

Thanks for such great info... I really appreciate your insight and experience. I'll make sure that ask a few more questions and see what else may work. Thanks again.

Thanks for all the responses. I'm considering the hard money route just to reduce the amount of cash out of pocket as opposed to conventional financing. Is my thinking faulty here?

Additionally, I appreciate the reasons for the reserves -- it just makes good business sense for the lender. But Valerie... you said I could use up 60% of the vested amount of my 401K? I have enough reserves if I do that... but the other lender I spoke to wanted me to pull it all out. So that's what prompted my question.

Do all hard money lenders require a reserve? I've just started talking with a hard money lender and they want at least 20K in reserves before moving forward. They claim it's standard. My credit is good, my debt-to-income ratio is good, etc. I am a newbie -- and have one rental that I financed through a conventional loan five years ago.