I am a newbie investor planning to buy some properties in San Antonio, TX (SFH) and rent them for as much cash flow as I can get. By the way, I’m not from TX. I’ve looked at many different loan programs but just need advice from seasoned investors.
My FICO = 798
Day job salary = $110k/yr
Cash in the bank = $50k
Purchase price = $150k or less
Goal: I will be using a lender and I don’t want to use any of my own money for down payment. But I want maximum cash flow.
My goal, am I asking for too much?
Is it possible going through a lender?
What about 100% financing and pay interest only? What’s the downside? Will the interest rate be high if I stick with fixed rate?
Trying to get away from ARM because of the rising rates. Am I right?
What do you recommend, regarding financing, to attain my goal?
I am ready to pull the trigger but just need some good advice on financing. I appreciate all the advice I can get. Thanks.
There are lenders that do 100% financing for NOO properties, but the rates are going to be mid 7’s on th first and high 9’s to low 10’s on the second. the best thing for you to do would be to put down 5% and do an 80/15/5. This will help you with lowering the rate on the second. Also, to qualify for the 100% financing you will need to have a positive number for your operating income. In a nutshell what that means is they take the average rental income in the area and multiply by 75%. That number is your operating income. So your PITI needs to be below that operating income number. So at a first lien rate of 7.25 and a second of 9.5 with your insurance and taxes at $325 a month your payment would be about $1335 (interest only on the first). So basically you would need to be renting this house out for $1800 a month to get your operating income where it needs to be. If you put down 5% you don’t have to worry about the operating income. Also, a friend of mine is moving to San Antonio as we speak and has been down there looking for a house. You may have some trouble getting $1800 for a rental property in San Antonio. Hope this helps.
Depends on the property and how much it cash flows. I know some folks who have rates @ 18% + and their properties still cash flow like nobodys business.
I would avoid the interest only option if you are shooting for 100% financing…one day it’s not going to be interest only.
Due to economic uncertainties in the comming years (Iran Oil Bourse, Central bank reserve diversification, etc) I would also avoid adjustable rate mortgages.
Purchase price = $150k
down = 10%
30 yr. fixed = 5.875%
mortgage (including T & I) = $1,072
I can buy a $150K 5 year old SFH in San Antonio that is 4/3 2500 sq ft. and rent for $1200/mo. $1300 or $1400 is possible depending on location, condition of property, and may take a while on the market.
I haven’t included all the expenses yet. But as you can see I will have nearly no cash flow (maybe even negative) unless I rent it for $1400.
Based on the advice I got so far, it looks that I will have to put something down to avoid high rates. OK I’m open to that now.
With the 80/15/5, how does this all break out?
How about an unsecured line of credit for the down? What’s the downside?
That’s not going to happen…Those days are over. Unless you buy the rate down you are not going to get a 5.875 on on 30 year fixed mortgage with only 10% down and an investment property.
Will the seller pay some closing costs? If you can get them to pay 6% of your closing costs you can use some of that money to buy down the rate as low as possible. Since you are going full doc that will help as well. Also, the cash flow is not to bad at all. from what I have read on this site $200-$300 cash flow is not bad at all. Also, to look up taxes in Texas you can use this web-site.
Problem is…it’s a single family. You get the wrong people in there and you take a 25% loss on income and have some replacement costs and you could be in big trouble. I suggest a larger down payment or a property with more units.