I bought my house in March, when the market was at it’s worst (some say). I was very easily approved at a rock bottom rate with a 15% DP. I have great credit (over 750) and zero debt. I have equity in my house and all vehicles. No CC debt (not even current). However, I do not want to deplete my personal bank account for an investment property. Given my stellar credit and the bank knowing I do have money saved, can I get a place for only 3-5% down? I know I will have to guarantee the loan and the rate will be higher, but is it possible?
I read investors saying “you just need money OR credit.” Well, I have the credit and the security of money, so can I do it or is it gunna have to be 20%?
Great question. It really depends on what type of investing you are looking to do. If you are looking to purchase homes, fix them up and re sale you can keep the 3-5% in your pocket in many cases. Look for a hard money lender what will give you the money for the complete purchase, You may need to use a home depot credit card to get the repairs done. If you are wanting to do rentals you are going to run into some challanges. Most lenders are looking for 20% down and will not give you more than 4 loans in your name. My advice is to flip properites until you can pay off a rental property free and clear. You can always find a hard money lender to give you money for a fix and flip, but it is difficult to get money for rentals. This is a long term plan work the fix and flips while builidng up a rental portfolio. Most investors that bought rental properites 2-5 years ago are losing them today because they can not rent them and keep the payments up.
This is good info. I do want to get into flips someday. Right now, we want to start with rentals and maybe wholesale because we aren’t doing this full-time. We just want to get a handful of simple easy rentals to establish our business, then when we have the knowledge and money, move to flips and do things full time.
Why don’t you look into buying directly from a “don’t want it anymore” owner and having them carry the loan or taking over their loan?
Start reading the private party"real estate for sale" ads, and asking those sellers if that will work for them. They are not paying any real estate commissions so the closing costs won’t be large. If you give them a nice monthly payment and take over their headache, you may have a deal. Just keep asking. Also put a little ad in the Pennysaver or free weekly ad newspaper.
Your credit worthiness will also look real good to a seller. You’re not the kind of person who is going to default.
Hard money is expensive money, so if I had the cash to flip, I’d use my own cash instead of hard money, and then pay myself back when the house sold.
nsgroup, your best bet is to go around to 4-5 different banks, make an appointment for an interview with their loan officer, and find out what they can do for you. It’s their job to sell their product and they are looking for good borrowers, so they won’t mind sitting down and taking the time to explain the various options to you.
It used to be (and probably is still) that banks were thrilled to give loans secured by hard cash. So they might give you a 3% down loan if it was secured by both the real estate and your IRA, savings account, or stock portfolio.
Hard Money can be expensive. However consider getting a loan from a bank. You are going to be pay 3% in closing cost in most cases. The intrest rate will be much less. The main point to rember is that that you are limited to the amount of loans you can get for rental properties. Right now most intiutions will limit you to 4 loans in your name. Once you get over that you are not going to find more money.
the points is it is easier to get money for fix and flip or wholesale investing than it is to get money for rentals. So rather than use your money to do a fix and flip, why not use your money to pay cash for a rental? Since you can always get the hard money to your next deal.
The other major advantage to doing this is you are getting the full rental income each and every month. You may not have a deal to fix and flip or wholesale every month and so your money will be setting idle.