Buying, Holding And Building Portfolio...getting Started?
OK..here's the deal. I currently own my primary home and have about $15K equity in it.
I have been lurking here for many months and understand the various money-making strategies.
My preference is to buy single family homes and rent them out for the long term. Start with one this year, add two next and so on and hold them for the long haul.
So here's my question: How does one get financing for multiple properties, especially if one has moderate income?
Do the lenders look at the rental potential, or is it based on scores like a mortgage on a primary home?
It seems that if someone with a 70K income is buying up property, the mortgage people would be nervous.
How does it work?
Thanks,
CC
They will look at the big picture. If it is a rental property they typically want a bigger down (like 20%) and the bigger the risk the higher the interest rate. They will consider rental incomes towards the loan but they have their own formulas for figuring maintenance and vacancy factors......Best thing is to find a loan agent and tell them what you want to do and see if they can get you preapproved...this will save you from looking at properties that dont meet your approval....There are other types of loans that will take a lesser down payment some even to 100% but somehow they are going to make their $$$. Click on the lenders tab at the top of the page for some ideas on types of loans available.
B
you are doing exactly what i am trying to do. i too have been reading a lot and lurking about, and i finally have decided to jump in.
im down here in florida and i found a company that will pre approve you for 100% financing on an investment property with 1 point originiation fee. they give you a limit that is defined by your credit rating, income to debt ratio, the standard stuff. i dont work for them nor am i schilling for them.
i am saying that there are lending institutions out there that will loan out 100%.
a hard money loan will be more expensive and would not do well for what you want to do. too much interest and too many points unless you know a better lender than most.
most regular lenders i have been calling (market street, wells fargo, etc) say that investment loans are usually 10% down minimum, with 20% preferred. but they will loan it to you.
if you buy new, then you have the seven to nine months of building for the house to appreciate, plus you can get your advertising out there early for renters. and youre renting a new house out. plus most new houses bump in value as the development is done.
the downsides to building new is the builder competition. why rent when you can buy? but thats a risk you have to factor in. it really depends on your level of risk acceptance. you also will need some up front money as earnest money. but if you structure your loan well, you can get that back at closing. or at least some of it.
i figure let the equity build for two to three years and pull it out to invest in another one. the equity investment lowers the mortgage you must pay, therefore your rental will cover plus add cash flow. if you continue for ten to twenty years, the aggregate equity will allow you to pull all of it out, invest in bonds, or something else fairly stable, and live off the interest. or just live off the rent coming in and never sell them all. give a couple to your kids as a high school graduation. they can buy their own car.
i am green, and i dont know much, but this seems a less risky way to build a large equity base without swapping around cash too much.
i see buying a house to rent out as a bank account. i pay for the account, but the bank chips in 100k or so, and i get to keep the interest earned (equity). and my renters help me pay for that priveledge by paying most, if not all , of my mortgage.
maybe someone with better knowledge can steer you better than i, but i think common sense works in this businuss as well as any other. if it feels right, go with it.
ragdelaed