Buying a Home With Intent to Later Use as Rental Property?

[Tom Peszek]

Hello all, a definite newbie here - I have owned a home in the past (bought and sold several years ago), though was not formally a landlord. I'm looking to move to a new area before the end of the year and am thinking about my longer term strategy.

The area I'll be moving to is a very hot market for short-term rentals. I'll be getting married soon, and the fiancee and I would like to buy a small-ish place in a trendy, waterfront area and live there for at least a year. After that, I'd like to rent the property out while also buying a home better suited for raising a family (which is to say, a bigger place in a less trendy area/suburb).

I have no problem with running the numbers to see if it makes sense from investment and cashflow perspectives, but I'm not sure how the financing could work in this situation. So, my questions:

1. If after a year+ of owning the first property, is any bank going to be willing and able to give me a second mortgage? I don't think I would be able to document established income on the first property, since it wouldn't actually get rented out until after I move into the second property. I do not believe our combined incomes, without rental income, would be enough to justify the size of two mortgages combined
2. I probably could get enough capital for a 20% down payment on each property, though obviously that would put a harder price limit on what I could get for either property. Is putting less than 20% down on either one feasible?
3. Finally: is there a better approach or strategy I should consider?

Thanks in advance!

[Dan Mackin]

@Tom Peszek

1. There are ways to get that second mortgage. As you mentioned already some of it would be based on your current income. To extend that income you can put a lease and security deposit in place with a new tenant at home #1 and some lenders will count that towards your income to purchase home #2. In this scenario short term income won't really count since most lenders don't like that style of income currently.

2. Depending on income you can do anywhere from 3%+ down in most cases. Sometimes less, but that is a very locally dependent thing. If you're owner occupying it is very rare that you need 20% down.

3. Read this book... 

https://www.biggerpockets.com/store/house-hacking-ultimate