First investment property!

[Ryan Wood]

I'm wanting to purchase my first investment property but don't have the money for a 25% down payment for a investment property loan. Not sure if this is true but someone told me that I  can purchase my first house with a second home loan even though I don't have a primary home. They said I can use a second home loan to purchase my first property and ill be able to rent it out. Is this true?

[Torrell Palmason]

So what it sounds like you are asking is can you get a HELOC with no current property and the answer is no.

I would like to clarify a couple other points for you. If you are looking to do 1 unit investment property with Conventional/Fannie/Freddie the down payment is 15% and if you want to do a 2-4 unit the down payment is 25%.

Another option for you is to get a 2-4 unit Owner occupied FHA loan for 3.5% down. This will require you to live in one unit for a minimum of 1 year but you can rent out the other units. On this loan type with 3-4 units you will need to pass a self-sufficiency test which is just a test to verify that the rent from the home pays for your PITI (Principal, Interest, Taxes and Insurance).

Another option if you are interested in fixing the home prior to renting it is the BRRRR method. With this method you buy the home at subpar conditions with Hard money at 10%-20% down. The hard money then covers the rehab costs and you are making interest only payments on the loan. After your rehab is complete usually 6-12 months you refinance the home into a conventional loan and if your ARV (After Rehab Value) was high enough you can pull your down payment plus your operating costs out of the built up equity so you essentially purchase the home at no cost.

There are many options to getting started in this field and it is up to you on how you want to get in the game 

Best of Luck!