Buying A 2nd Investment Property
I have just purchased a multi-family property in Ohio. I was planning on using it as my primary residence. I got great financing- 100% no pmi at 5.87% blended rate.
I would like to buy a 2nd property.
My question is: what are the guidelines lenders use on 2nd properties? How long do I need to wait before purchasing another? What rental income can I use, in addition to my personal income?
I would like to buy as soon as possible, given the fact it only cost me $1000 to get into this prop. Any advice?
Also- would it be possible to make this 2nd property my primary residence to get the lower interest rate?
Be careful on buying one property after another as a "primary residence". A good amount of investors used to do this, but lenders are cracking down on this practice.
In order for income from the first property to count, I believe it has to be 'seasoned' for one ful year. Even then, only 75% of the income counts to offset the payment going out. i.e. If your payment is 1200 and your rental income is 1600, you're break even on your debt ratio.
If your debt ratio will handle it, you could buy a 2nd property right away, but you'd probably have to buy it non-owner occupied and you (probably) wouldn't get such a good deal on the financing. If you want to know for absolute sure, contact your mortgage broker and ask. Won't cost you anything. You may even get pre-approved and voila. You've got your price, now go shopping.
However, there are many more creative ways to buy than a straight purchase. If I were you, I'd hang around here a bit, read the books these guys tell you to read, and educate yourself about different options.
Good luck
Ronnie
p.s. I know there are 'seasoning' requirements, but I'm not sure about the length of time. It is 1 yr with my lender. It may vary. You'll have to ask.
Attempt to create a positive cash flow on your current residence. Maybe you could rent each room in the second unit individually (possibly a higher rate) instead of to a family. You could also consider renting your primary unit (the one you are living in) and move into another property with a subject to technique. Maximize your cash flow by renting the unit properly and possibly live for free. (both units cash flow covers the NEW ‘Subject To’ mortgage payment)
If you are not familiar with this technique, read the postings, and pick up John Locke’s 'Subject To' program.
Eric &Rosa
[addsig]
I recently purchased a rental home and was able to get positive cash-flow. I am interested in purchasing again but now I would have my own personal residence and plus the rental home.
How should I approach the financing of another property since I have recently bought the second property?