Hi all,
I and currently looking into buying a property to rent out. I live in NJ and the property prices in this are about 100K and up. I am currently unemployed, but I own my house outright and have some income from renting out part of the house.
I have about 80K in cash and socks plus about 140K in an IRA.
What is the best sort of financing? I have read about hard money loans.
I would appreciate any advise on how to go about starting this.
Thanks,
Nick
The best source of money is private money. With hard money you can be charged up to 30% or more. Also some lenders require a downpayment and a credit/ employment check. Private money is the only way to go but it is hard to get as a newbie. Since your already renting out a place you can use that as your credibility.
I hope this helps.
if you own your house outright, see if you can get mortgage against your home. make sure that you can cover the rent, taxes, insurance, etc of the other house for the amount that you are borrowing.
you might not be able to get financing if you don’t have a job, so your best bet might be finding some sort of employment before trying to borrow money.
I would look into private money first. It would be the least expensive and the most flexible for sure.
Nick, in your present predicament of unemployment, I suspect tradtional financing will be all but impossible in today’s credit climate. Someone mentioned private lenders. A good idea but a tough route to go if you’re just getting started.
Think with a creative approach. Limit your risk and your need for cash. Look into options and lease options as a means to get started. Maybe wholesaling or bird dogging, also. Good luck!
Private money is not a good idea I think cause it has a higher interest rate than market. Secondly it’s a risk for both the lender and borrower. Calculate and if possible mortgage the property you have. That way you can generate more with less interest cost.
You will likely get the best rates with conventional financing but private money is usually the way to go. It is difficult to get a conventional loan and without a job it will be near impossible even with your assets. Hard money is an option but often very expensive and with crummy terms. With private money you decide the interest and terms then it is pass or play.
Agreed private money is the way to go. You MIGHT pay a higher than “market” rate. But its much more flexible and available for deals/opportunities a bank will deny.
I would avoid putting a mortgage on your house. Yes, it’s a tempting source of cash. But you will sleep better at night and make much sounder business decisions knowing you don’t have to make a payment coming due… you will be in a position where you don’t have to do a deal just to make the house payment this month…
Landlord tenant laws in NJ are so slanted in favor of the tenant that it isn’t even funny. I suggest that you learn your local landlord law thoroughly before you decide to invest in rentals. If you understand the law, you can protect yourself.
If you start renting without undestanding what the tenants can legally do to you, you could possibly lose everything. You don’t have the resources to withstand a 6-12 month seige, plus fines, plus damage, plus refunds to the tenant. Be absolutely certain you understand all aspects of NJ lead paint laws.
I personally would not mortgage my private house for an investment. I enjoy the security of knowing I have a place to live.
I suspect private money would be easy to get. Offer 6% secured by real estate, and some retiree who is earning .03% on his savings is going to be interested.
Hard money is very expensive and strictly for very short term. You might use it for a fix and flip in a good market where you know you can re-sell fast. It is not for buy and hold.
I haven’t asked recently, but it used to be that banks would be happy to give you a loan secured by your IRA, savings, CD’s, stocks and bonds.
Where is Locke?
The best form of money with the exception of seller financing and even then it may take a second fiddle to SUBJECT T0 INVESTING…
After those two I would rank best sources of money as follows…
Seller Financing assuming low interest limited number of payments etc.
Subject to the existing financing - Buy John Lockes Subject to course
Private money… Find out what your Usury Law is and don’t exceed it
Equity Lenders… AKA Hard Money Lenders The be difference is that equity lenders wont ask for your SS number
Partnerships - People who have money and want to play with you and not loan to you
Self Directed IRA Your 140k is probably returning a very low rate
Your Own CASH - Just make certain you dont use it all… Investing is called investing because there is a risk
Option Investing - Tie up the property and sell it concurrently… Fairly easy to do.
Lease Option - AKA Sandwich Leases I hate these things.
Conventional Financing - Issue is that you’re limited to the number you can do at a time and each lowers your FICO score…
WORST PLACE TO GET MONEY ----- MORTGAGING YOUR HOME…