All Forum Posts by: Adam Petterson

Bill Goodland Bill, if you own a $1,000,000 dollar property with a $600,000 mortgage you have $400,000 of equity. If this house is your only asset and the mortgage is your only liability, your net worth is $400,000

@Shasha Jhaveri If you trust your friend it can be a great opportunity to get better access to deals and market knowledge. As long as they are responsible and professional it could be a great personal and business relationship

Vestonia Viddy requirements will differ with each financial institution you talk to. Many will want to see a debt to income under 50%. I would talk with every small bank within 50 miles and just had the conversation with them to see if it's a good fit. At the credit union I worked at we called our portfolio loans "business loans" I would recommend asking or a commercial loan officer or commercial lender at each bank.

@Luis Vilar

Right now the multi family market is hot and its tough to find good cash flowing deals. I would say that the 50% rule is a good benchmark, but it will depend on the property you are buying. If you are buying a turn key property your expenses may be lower.

I would also ask if you have ever thought about getting a roommate as well for your unit? A roommate in your unit could get you an additional 500-700 per month.

I would continue to search until you find a property that can cover your PITI and a little extra. Worst case if you have to pay a couple hundred bucks a month for maintenance that is still a great deal to break into investing.

Best of luck

@Vestonia V. You have a couple of options to explore. 

The first is conventional financing. You are able to "cash out" 75% of your investment property's value with a conventional loan. However, in order to do a cash out, you need to wait at least 6 months (maybe even 12). This is a good option if you are looking for a fixed rate and 30 year money. With a mortgage that small, I would look into the next option.

The second option would be a portfolio loan. Many small banks and credit unions will offer loans that they will keep on their books. They may refer to these loans as "business loans" or "portfolio loans" Your typical portfolio loan will have a 5 year fixed rate and will be on a 15 or 20 year amortization. You may be able to get a loan up to 75% of your homes value without having to wait out the seasoning period.

The last option would be to talk with a small bank about setting up a line of credit on your investment property. If you own the home free and clear it may make sense to use your property as a line of credit. Many banks will lend 70-80% of the value if you are looking at a line of credit. This way the funds are available if need to get money or want to purchase a property with cash

Hope this helps

Jack Taylor Jack it really depends what you are trying to accomplish. Personally I would always recommend the 30 year mortgage when rates are this low. As said above you can always pay your loan on a 20 year pace as well. If you plan on keeping the property as a rental the 30 year will give you better cash flow, and your renters will be paying the mortgage not you. Another added benefit is the interest that you can write off. My personal rule of thumb is to get a 30 year and pay down the loan on a 20 year if I am living in the property and once I move out I pay at the 30 year payment to maximize cash flow

Chris Smock I like the idea Chris and there is a way to work around it. Many smaller banks and credit unions will do business loans (some banks will even allow the loan to be in your personal name, but it will be considered a business loan by the bank). Reach out to local business bankers and see if they report their business loans to the credit bureaus. (All banks will pull your credit, you want to see if they will report your debt and payment history). Once you find a bank that can work with your requirements you can refinance the vehicle and poof the loan is off your personal credit. I'd say the better route would be to find a lender who's underwriting criteria isn't quite as strict. Best of luck

@Phil Grady

Phil, It is all about your comfort level and what you are looking to get out of your purchase. 

Buying multifamily definitely has its upside as you can basically live for free if you buy right by renting out your other units. It will also give you a test run at managing properties as you will have other units to take care of when it comes to maintenance, repairs, rent collection, etc. The down side to multi family is that the purchase price is higher, so your 3.5% down will still be a substantial amount of money.

Single family homes aren't a bad way to start either. If you are living in a single family it would be very beneficial to have a roommate in order to split some of the costs (mortgage, utilities, etc). As said above, a single family home that you live in can actually be a liability if you don't have any cash-flow coming in.

@April M. Kimble

I would definitely let them know that you own the property. They are more likely to take care of the house if they know they are living with the owner. As it says above, do not give any special treatment to the tenants. Make sure they know when rent is due, and what the consequences are if they are late. Otherwise you will have roommates paying you 1-2 weeks late. I recently bought a house and rent it out to some college friends. Best real estate decision I have made so far.

Best of luck!

David Zheng congrats! I'm have just recently started off on a similar path. I am 24 and recently purchased my first property. My goal is to have 10 properties by the time I reach 30! Do you manage your own units or do you have a rental company take care of your properties? And did you house hack one of your condos in order to get started?