All Forum Posts by: Sasha Mohammed

Hi @Joseph Barthelemy

FHA will allow for 3.5% down minimum on multi-unit properties, but you would have to live in one of the units.

If you opt for a bigger multi-family, keep in mind that for 3-unit and 4-unit properties, FHA has an added guideline which require the unit to fully self-sustain (rents need to cover the mortgage 100%). More often than not, this added guideline will force you to bring more down than the 3.5% minimum, but if the property pencils out, you have the ability to bring in less.

Conventional owner-occ duplex could go as low as 15% down payment, but again, you have to intend to occupy one of the units. Both FHA and Conventional would be full-doc for qualifying, with DTI calculations.

The rule of thumb is you need to live in there for 1 year... what you choose to do after that year is up to you. 

Lastly, if you are looking for strictly investment opportunities (and don't intend to live there), you could try for Non-QM DSCR financing. Many lenders will allow for as low as 15% down, albeit tougher to find these days than even 6 months ago. This loan type you CANNOT live in the property, but "qualifying" would be based off of the property's ability to generate income vs it's carrying costs, not your personal ability-to-repay.

5%-10% as requested would more than likely have to go full-doc FHA.

Hope this was helpful! 

There are institutional investors who will do renovation loans for investors without the hard money down payment requirements or rates. 

As an example, you could do something like: 20% down/ lender would finance 80% PLUS up-to 100% of the rehab budget, for a maximum of 75% of the ARV. yes, you will pay points, but the rates are better than hard money -- off the top of my head right now, 9% - 11% (depending on experience and credit). they are IO payments, and no prepayment penalty, so if you finish the project in 3 months, you can refi it into a LTH (call it a 30 year fixed) without a prepayment penalty.

i suggest reaching out to a mortgage broker who is familiar with investor-specific lending options; even after paying a broker fee, you could end up in a much better situation than reaching out to hard money lenders directly

Edit: you may actually have better luck going private money on this deal specifically, as most lenders will have about a $100k minimum loan size requirement

1. Call a mortgage broker :) preferably one that specializes in loans for investors. 
2. Another option - find meetups in your area specific to RE investors.
3. I think there might be a section within BP that offers lender lists, and another section i believe that you can post about your deal. you might find someone lurking here who may be interested in partnering with you. 

GL!

you'd be better off trying to wholesale it. 

if you buy it, and then turn around and sell it, you're paying 2x closing costs, plus you then become responsible to pay the realtor on the buyer's side of your sale. PLUS you also end up with short term capital gains taxes (disclaimer: i'm not a CPA).

what's the question you're trying to answer in this post?

@Logan Wright i like this question because you're going to get a lot of differing opinions here. so i'll start with a disclaimer - there is no one-size-fits-all in real estate. what makes sense for you may not make sense for someone else, and vice a versa.

personally, i dont think i would be interested in moving from cash-flow positive to negative for the purpose of purchasing a another property... UNLESS that new property would significantly offset the losses here. and even then, i would be very cautious with this play. 

for example, if the new property would bring you a +$8k NOI, it could make sense.

or maybe you meet in the middle - instead of taking out the full $50k initial investment, maybe you take out $40k and break-even on your NOI (i don't really like this, either, tbh).

or maybe you look for another way to get your hands on the $50k and buy the other property and have 2 cash-flowing properties. 

if there's a deal you absolutely HAVE to get your hands on, I get it. I think for me personally, too many unknown factors to pop up down the road (consider a vacancy for example) that could make a -1200 NOI easily turn into double or triple that, i don't think i would be comfortable with that investment strategy personally.

following this post to see what others think about it :)  

Speaking for the lending side - your income/ tips are only going to be a factor if you're going with a traditional full-doc mortgage. IF you can go this route (typically, lenders will give you credit for your tips based on a 2-year average, plus YTD), you will get the lowest rates, lowest points/ fees, and overall best terms. 

if you cannot qualify full-doc or with an income-based loan type, look into DSCR lending. typically, it is slightly higher in the rates, and you will pay points to obtain the loan... but this allows the lender to qualify you off the rents received from the property as opposed to your personal "ability to repay".

what @Wale Lawal mentioned above about having a local team is VERY smart. not just once you purchase the property, but also while you're shopping for the right deal.

GL!

the debt would be on both properties in a cross-collateralization situation; so if either are sold, the debt would have to be paid off in-full in order to release the liability (or lien) on both. if one was sold and there was not enough proceeds to pay off the debt in-full, you could potentially run into problems if the lender did not let you do what's called a "partial release". < this is what i would ask the prospective lender, if they allow for that. So in your scenario, if you sold your new-build and the proceeds did not exceed/ fully pay off the debt, would they allow for an unpaid portion of it to remain attached to your primary residence while still releasing the lien on new-construction, delivering the potential buyer clear title (which would be necessary in a sale transaction). i hope i didn't just confuse you further. basically, you want to know if they allow for a partial release, just in-case. 

edit: if they say no, then you'll want to make SURE your numbers are sufficient to pay off the debt once the new-build was sold or refinanced. Otherwise, you could end up stuck. 

i would start by determining how much down payment you can afford. fannie/ freddie are going to require significantly larger down payments than FHA; however, FHA has an added guideline on 3 and 4 unit properties which require the property to completely cash-flow-positive off the rental units alone with no contribution from you. This is called the "self sustainability" guideline, or test, and it should not be overlooked on multi-family properties. Im not sure where you're looking to buy in, but where i am, in CA, properties which will pass this test are few and far between, making FHA minimum-down also not an option.

Once you've determined how much down you can swing, talk to a loan officer about how much house you can buy. Most multi-units will have to be run on a property-by-property basis, since some tenants will be newer with higher rents, and some will have been grandfathered in at low rents for seemingly forever. Rent control is another added factor to consider, depending on where you are looking. 

if you have the patience, this strategy is amazing! ive seen many get into RE investing with this as a jumping-off point. It will take a bit of grit to find MF that pencil's out, but well worth it. 

one more piece of advice - work with a realtor who is familiar with house hacking/ income producing properties. not any joe-blow realtor is going to be a good fit here. Someone like @Jeffrey Isenberg if you're in the LA area will run proforma's to determine the right-now numbers along with the future numbers. 

Lastly, keep doing what you're doing: asking questions, reading on forums, talking to people. there is no shortage of knowledge or experience on BP! 

GL!

hi @Shanique Antoine,

there are loan types for RE investors which do not look at your personal income at all. I suspect you'll have a difficult time working with these lenders just based on your price-point, most are going to start on a $100k minimum loan size. but just food for thought -- how it works is: instead of looking at you as the borrower and your "ability to repay" the mortgage, they look at the property as a business. Essentially, if the property is a cash-flow-positive business, you "qualify" so to speak. There are property specific guidelines, location guidelines, credit score minimums, etc etc. but speaking strictly to the income aspect, these loan types do not base their qualification off your personal income. do some research on DSCR so you can learn how these deals are analyzed for viability and crunch your own numbers. I believe BP has a calculator you can play with. :) wishing you the best of luck on your RE journey!

you could, but i suspect you wouldn't get accurate data that way. is the house legally permitted now as a duplex? if-so, you should be looking at duplexes as comps.