All Forum Posts by: Henry Le

Hello BP community,

Is it possible to obtain conventional financing from banks without a credit score?  I heard of manual underwriting, but from my research, you have to jump through hoops and most banks don't offer it.  

I don't use credit cards so I don't have a credit score/history.  I just never had a need for them since my expenses are low and I save around 90% of my income due to living at home. I pay for everything in cash and don't have any debt.  I have around $200,000 in liquid assets, primarily stocks and cash.  So my borrowing ability should be better than most with a credit score.  

I haven't contacted any banks regarding my situation. But do you think that local community banks and credit unions will be willing to offer conventional financing to someone without a credit score, but with assets? Someone mentioned FHA loans, but I don't think I qualify.

Any insight would be helpful, thanks!

@David Hutson 

Thanks for hosting the meeting.  It was great seeing and meeting everyone there.  I had a good time.  Thanks again!

 Sounds good, thanks!  See everyone there, hopefully I won't get lost haha.

@David Hutson  Is the parking off J Street between 4th and 5th available?  It's not closed off due to construction?  Thanks.

@Chris K. 

Thanks for the tips.  I'll look into the 1-2%, thought it seem it'll be really low in my area.

If I apply the 50% rule to my area then I get the following

- Purchase price: $150,000

- 20% down payment: $30,000

- Loan amount: $120,000 at 5% over 30 years

- Monthly P&I: $644.19

- Monthly rent: $1,200

- Rent after expenses: $600

- Rent after expenses and P&I: -$44.19

I applied the 50% rule to home prices during the bottom of the market in my area and the returns are still not that attractive.  Are most people just breaking even on their rental properties?  

@Gerald Harris 

Yes, I looked at Charlotte, NC and the prices are incredible.  My friend moved there a while back and he couldn't believe how affordable the houses were.

The room rental is a good idea.  I haven't thought about that before.  Friends and coworkers rented a room in their house, but they still lived there.  

@David Hutson 

I'm looking forward to the Sacramento Meet Up this coming Thursday.  Look forward to seeing everyone there!  Thanks for the great info, you've been extremely helpful and kind with your knowledge! =)

@Tou V. 

I would imagine it'll be harder to cash flow when interest rates go up.  Ideally, I would want my first rental to be fully rehabbed.  But who knows, expenses can come out of nowhere.  And you're absolutely right, those major capex can really eat up all that prior cash flow.  

Thanks for the replies thus far everyone!  Really appreciate it.  

Thanks for the reply @Jon Holdman !  I've looked at the 50% rule, it is a good rule to remain conservative.  My assumed expenses, excluding the mortgage, is slightly under 50%.  

I'll look into the 50% again and see if it remains profitable to invest in my area.  Thanks again.

Hello fellow investors,

There are expenses that come with single-family rentals.  What are some estimates you use to determine your net rent after expenses?

I live in Sacramento.  So far, my expenses include the following:

- Property Taxes: 1.25% of purchase price

- Rental Insurance: 0.5% of purchase price

- Management Fees: 10% of gross rent

- Vacancy Rate: 10% of gross rent

- Repairs & Capex: 10% of gross rent

- Utilities: (garbage, sewer, water): 10% of gross rent

- Mortgage: 30 year with 20% down payment

With these assumption, I get negative cash flow in my area.  I applied the parameters to other areas such as Memphis, Nashville, Cleveland, etc. and the cash flow is barely positive.  

I see people saying they achieve north of 15% cash on cash returns.  Is it because their assumptions are different than what I have?

Thanks.

My mom rented our old house to this one guy.  He seemed like a perfectly normal person.  The only problem is he didn't live in the house!  Rather, he'd park his car outside and sleep in it at night.  He'd shower outside using the water hose.  Weird guy.  Then one day, he disappeared and was never to be seen again.  Luckily, the house was well kept, mainly because he barely stepped a foot in it.