Hard Money Loan for Rental

[Hoa Nguyen]

Hey everyone! I have a situation that I would like some input in. I currently have my eyes on a 44k turnkey rental that rents out a $675 a month with tenants in place. The problem I'm facing is finding the right financing methods, I have the cash to finance between 20%-35% of the price, but no local bank or mortgage company is willing to touch it because the price point is below 50k, and my DTI is pushing the mid 40s. I know seeking a hard money lender is an option, but I'm not too sure about those higher interest rates. Is a hard money lender the way to go? Or do you recommend any other options.

[Account Closed]

@Hoa Nguyen If you choose a hard money lender, what would be your exit strategy in getting out of the loan? Typically, the hard money loan is designed for a short period of time. As you mentioned the property is turnkey, what could you do to force appreciation through repairs, rehab, etc that would build enough equity or value to allow a traditional lender to allow you to refinance? If you can't build that additional equity into the property, it could be difficult to secure the financing you need.

You could try a personal loan to cover the difference in the cost but you will have to examine your risk tolerance, DTI, payments, etc, and if that would work for you. If your DTI is in the mid-40s before obtaining this property, I believe it will be challenging to obtain traditional financing but I could be wrong. If you could put a presentation together to show the profit potential, do you believe you could reach out to a family member, friend, colleague, etc to obtain the approximately 30K you need and split the profits? A little of something is better than all of nothing if it's the only way you can get the deal.