Financing Eight New Dev Sfh's?
I recently sold a rental unit and have 150k clear profit that i want to seriously leverage. A friend is developing a 61 home subdivision near a university and with 10% down I can conceivably buy 8 homes.
Using standard residential mortgages around 6 to 6.5%, the deal is cash flow positive with a cash on cash return in the low 20's. My question, though, is that the deal works off of the income it produces but if i'm to qualify for these loans, i'll have to take the no documentation route which jacks the rates up and cuts into my cash flow pretty seriously.
Anyone have suggestions on ways to creatively finance this deal? I'm considering commercial loans too.
TIA,
-jw
I'm guessing your saying you'll rent these out once they're built?
The builder will likely finance a high majority of the cost until it is finished. I would try to prelease the houses before they are finished, and then you can use the income documented in the lease towards your debt/income ratio. I don't know if that was the problem you were having (deb/tincome ratio), you didn't really specify.
Yeah, I think that's the way things will work out. I just spoke to the developer and they will write the sales agreements contingent upon having a 12 month lease signed so it sounds like you're right and the lender will accept that as income.
I also read, though, that FNMA and GNMA only count 75% of the income towards the ratios... Things are looking good for this deal but the devil is always in the detaiils :evil:
I'm thinking now that going with the individual loans is a better option than going with one commercial loan. I think it gets me more flexibility and better rates.