All Forum Posts by: Cara Lonsdale

You will have mortgage insurance for any loan with a down payment under 20% UNLESS you get a VA loan (Are you a vet?) However, the mortgage insurance payment on a conventional loan is usually considerably lower than FHA's.

Not to widen the net any more, but as another option to explore, there are usually first time homebuyer programs that could HELP you with down payment assistance, or closing costs.

My best recommendation is to sit down with a lender capable of doing these things so that they can properly educate and advise you, based on your specific situation.  For these type of deals, I work almost exclusively with a loan officer located here in Scottsdale, AZ.  However, I know that they also do loans in ME.  So, I would be happy to reach out to my loan officer here to get a COMPETENT loan officer referral for you in Portland, ME if you want.  Just let me know, and I will reach out to him to get you a contact.

You are off to a great start!  Thinking outside of the box is the best way to find opportunities.

Your 401K is a HUGE resource!  Check the options available to you.  If it is parked with an employer, they will have rules about how much you can access at any given time and the terms for doing so.  Many companies will allow you to take a loan out against it for up to 50% of the value of the account.  For you, this would equate to $20K.  That's a good start toward a down payment.

You may have the option to withdrawal from your 401K.  I would advise against this if at all possible as it would require a 20% deduction for the taxes, and a 10% penalty fee.  OUCH!  However, if you borrow against it, you have use of the funds, and pay them back to the account over a short period of time.  You even pay interest to yourself on the loan amount.  So, your loan is also an investment!

Alternatively, if your 401K is leftover from a previous employer, and you can roll it into an IRA, you should consider a self directed REIT (Real Estate Investment Trust). REITs use the funds for real estate investment. If interested, you should explore options with your accountant to go over any tax implications to minimize your tax burden custom to your situation.

I would shy away from using your car to build cash for a down payment.  Taking on a car loan will increase your debt, and may throw off your debt to income ratio when qualifying.  

I have never heard of this business.  NOT to say that they are not legit, just that I haven't heard of them.  There are so many of these "we will buy your house for cash" companies popping up everywhere, that it wouldn't necessarily scare me off to work with them.  

My suggestion is that you take a substantial Earnest Money deposit, and make it non-refundable.  If you are taking enough Earnest money upfront, then the best case scenario is that they default, or the deal falls through, right?  

 Yes!  For owner occupied loans, you have a flood of options, starting as low as 5% down.  Keep in mind, the more you put down not only lessens the interest rate, but also increases your cash flow potential (because the principal loan amount and payment are lower).  HOWEVER, if you want to maximize your funds in hand, and get you closer to the next deal, a lower down payment is something to consider.

Also, getting back to the FHA option for a minute as it relates to some of the other posts here about rehab expenses..... FHA has a program that allows owner occupied Borrowers to finance the rehab expenses! It is called a 203K (or also 203B) rehab loan through FHA. You may want to ask your lender about it, or go on the FHA site and find an approved FHA 203K lender. NOT every lender offers these. They have to be certified with FHA to offer them. But basically, you get a contractor quote for the rehab work, you submit it to the lender, they approve it, then they do an escrow hold back with the funds. So, that as the items are completed, you can have escrow release the funds to pay the contractor. There is a way to be the GC yourself and just hire subs. If you are handy, this may be the better option for you. It is a great tool!

Since you are going to be an owner occupied Buyer for your first one, there is absolutely NO reason why you shouldn't take advantage of anything and everything you can to put you ahead for the next one.  Good Luck!!

My husband and I did something similar for our daughter when she went to college and we didn't want to pay for a dorm for 4 years.  It was a kiddie condo loan, or non-occupying co-borrower.  The entire loan was based on our credit and financial qualifications.  They looked very little at our daughter as she had a part time job, and short term credit.  I DO believe, however, that they required her to submit a government issued ID.  I'm not sure if that means that only US citizens are offered that kind of loan, or not.

My question to you is why don't YOU buy the new unit as an owner occupied Borrower and move into it, then let your parent's stay in YOUR previous unit?

This would keep your down payment low, and accomplish your goal without having to deal with an investor loan.

Something to consider.  I hope this helps!

Best of luck to you!!

I think you have a good plan in place. 

To clarify, the lender who refinances your property will still need to see equity, but often times sales comps have increased enough to show the required LTV so that you can take out your original purchase money.

Also, I am glad to hear that you hold other investments. They can actually help you too! There are many IRAs that can be converted into self directed REITs. This would allow you to use your IRA funds to purchase real estate. Additionally, if you have the ability to take out a loan against your investments (many 401Ks offer this), you could reach your down payment figure quicker by using those funds.

It looks like you have many options to explore.  I hope these ideas help.

Tee Hee.  I MEANT Erie, MI.  Since your profile states Arlington, I was just wanting to clarify.  So, you live in Arlington, but you want to buy property in Erie MI?

I may be able to offer a referral for one of my vested agent partners at the Keller Williams Realty office in Arlington.  Are you looking for wholesale property in Arlington as well?  Or do you live there, and are looking at purchasing in another area?  I just want to be clear so that I could provide the best referral.

You Are Ambitious!  I love it!!  I feel your excitement.  It's great.

You bring up a few different points, so I want to address them one by one.

Unless you are looking at private money or hard money lenders (who make up their own rules), many conventional lenders won't refinance for a cash out until you have held the property for 6 months.  Additionally, they would still want to see equity, so getting 100% of your money back in a cash out is slim to none.  

In terms of you qualifying for multiple properties, your quickest and most efficient way of doing this is using OPM (other people's money).  What I mean by this is using the rent roll to offset your debt to income ratio.  After the property has been on your taxes for 2 years (in some cases 1 year), the net income counts toward your overall income.  So, when you go to qualify for a new property, you are just qualifying on THAT property, not both.  Does that make sense?

A quicker way of doing this would be to purchase a property with tenants already in place.  To many lenders, if the property already has a proven track record with tenants, they will allow you to use that income to offset the debt to help you qualify for the property.

Another thing to consider would be putting 20% down instead of 25% down.  If timing is your biggest hurdle for building your down payment up, then it may be worth the slight interest rate bump you will see from slightly lessening your down payment.

Lastly, I would recommend HEAVILY, that if this is your first experience with real estate investing, you slow down just a beat and allow yourself to learn about being a property owner and manager before jumping in to several properties that teach you the lesson in an extreme way.  You may find, after your first one, that you don't like the type of property you purchased, or the price point, or the area.  If that's the case, it's alot easier to recover from 1 property versus 5 or 7 or however many that came too quickly after that first 1.

The lease runs with the land.

If you have a tenant, you most likely can't evict without cause.  The first step would be to ask for a copy of the lease.  Either the previous owner (who may not be cooperative) or the tenant themselves.  Once you receive a copy of the lease, you will know the terms and timeline.  If you don't want the tenant, you will have to wait out the lease.  Make sure your properly notice the Tenant at least 30 days prior to the expiration of the lease to confirm, in writing, that you do not intend to renew.  

Alternatively, you could offer them money to move before the lease expiration.  However, they don't HAVE to accept your offer, and you would need to make sure any offer didn't conflict with their section 8 agreement and/or eligibility.

Best of Luck to You!