Purchasing under $50K

[Patrick Reisinger]

Happy Memorial Day all,

I live in Baltimore and there’s a good investment property that I’m very interested in. The problem is that it’s going for under $50k and lenders don’t like to lend under that amount.

I also have 6 properties and it's starting to be a real hurdle for me to buy more rentals though the conventional methods. That being stated, can any of you fine folks (experienced investors) provide me with some guidance? Hard money lenders, local small banks, LOC?

I’ve flipped a property last year and it’s not something that I want to do moving forward. My primary focus is to buy and hold.

Thank you in advance!!

[Jarred Sleeth]

Hey @Patrick Reisinger,

Financing these cheaper properties can be difficult. There are options, however, you just have to look a bit harder, and they tend to be more expensive.

1. Hard Money- You'll need to find a lender that will do smaller loan amounts, this is probably easier to find than a bank that will do smaller loan amounts. You may also potentially find a hard money lender who will fully amortize this kind of loan. I know a few in Baltimore that do it this way, and at the end of the short term you have a paid off property. Could be an option.

2. If you acquire with HM you'll likely need a bank to refinance you out. This could be difficult if you continue to go the conventional way you've been going for two reasons. A, you'll likely have this in an LLC and will have to put it back into your own name, and B, you'll be looking at smaller loans which are hard to get. Sometimes you can package these up, sometimes you can't. Depends on the bank. I've had luck by promising continued business if the bank will refinance me out under their limits. Can't hurt to ask.
3. Private financing- Buy with friends/family money and hold for a short period of time and then the refinance may be easier for you. 

Whichever way you decide to go, I would recommend trying to improve the property when you purchase. This will allow you to build in equity up front, and it will make things easier on your refinance. If the values are over 75k for rehabbed properties, you will be in much better shape to get your refinance.