First Investment Property (SFH w/ questions!)

[Christopher Abele]

Me: $85k in 401k, $18k cash, $5k liquid investments (Robinhood). Credit score 780. Owe 100k on primary. Started the refi last week and will need $7k ish cash at time of close. ($3.5k or so is escrow which will be refunded.)

Property: Great schools, highly desirable suburb in Northwest Ohio. About 10 minutes from a new Cancer Clinic + a 68 acre development property that is being built currently. While the "city" is staying flat in terms of property values the suburbs have been appreciating. 

Property is a 3/1. This is an area that has almost no rentals so comps are tough. Comps in nearby suburbs have rented for $1,350 but might be high right now due to a "hot" market. Figure $1,100-$1,200 conservatively. 

The home is in pre-foreclosure and is a bit tied up; the mortgage is held by one individual but both he and the ex girlfriend are on the deed. She has not signed the deed over. We (myself and seller) believe that she would be willing to but might need a little coaxing (ie: throw her some cash.) 

The owner who's name is on the mortgage (and 1/2 the title) is willing to transfer the mortgage to me / sell me the property for what he owes. He believes its about $112k. Houses on the street have appraised for around $140k before the market went cuckoo this summer. Identical floor plan home down the street sold for $170k within 5 days of listing. It needs some work + appliances. Walk-thru later this week. 

My questions:

1.) All the podcasts talk about taking out a FHA / Conventional loan, but from what I can tell you cannot rent the property if you go this route. If I assume his mortgage I'm assuming its FHA, which means I wouldn't be able to rent the property. Can someone explain?

2.) The bank may be willing to accept a short sale; however, I would need financing. Since I'm already in the process of a refi on my primary, can I even do this? That is, with both happening simultaneously where might I get hung up?

3.) If this is not a traditional "owner occupied" property, what can I expect to pay in terms of interest on the loan? (I'm running my numbers at 5.2% just to run extremely conservative - but IS it conservative? Or is that more realistic?)

[Darius Ogloza]

There are banks that lend on investment properties at somewhat higher interest rates so that you can forego the residency concerns.  I would contact a local mortgage broker who can lay out the different scenarios for you.  You may want to post a referral request in the local Toledo Ohio section of this forum.