How many properties can I finance if I pay all cash for first 2 ?

Question

First of all I want to say hi to everybody since I just discovered this forum and website. Tons of useful guides and I haven't had a chance yet to explore it completely (I will soon tho).

I have a 250-300K to invest and I want to buy a few rentals that are selling for around 55-60K (Central Florida area) and those could be rented out for around $800-900/month.

I am not very familiar with real estate investments and how things works here in the US but at first I was thinking to pay all cash for the 2 rentals (50-60K each, total 120K) and then I wanted to put down 50% for 4 more rentals (120K) in order to get a loan from lender or bank "(10 years loan). Do you think bank or other lender would finance 4 rentals if I am not working here and won't be having any other income then from these rentals. Also please note that I won't be living in any of those rentals myself since I will be living abroad.

My current credit is not that great too (mid to high 600). My main question and concern is, if lender wants to see me working too and having other income as well in order to finance my rentals?

Overall if that would be possible, do you think that this is a good idea first to pay all cash 2 rentals and based on that to ask for loan for 4 more properties putting let's say 50% down?

If you can think of any other options or ideas, please be free to say your opinions. I do appreciate all your help.

Thanks

Mike Johnson · Answer

Thank you really guys so much for all the help!

Mick Mimnaugh · Answer

Mike, to get a feel for the numbers and as you gather information, go to the "Analyze" tab on the main menu of BP and use the "Rental Property Calculator". Put in the figures you know and work out your monthly cashflow, Cash on cash, NOI (net operating income), cap rates and a few more things. Put in what ever numbers you have and then try to get better numbers through your networks or local agents. I've always found that if you get good numbers you will buy well and stay out of trouble. Good luck.

Brian Saeger · Answer

@CharlieFitzgerald can you elaborate on your advice for @MikeJohnson in this post as I find myself in roughly the same position.

Gregory Emmer · Answer

@Mike Johnson HI Mike...I think it's always good to have a solid cash reserves "just in case." You never want to spread yourself too thin. And honestly, being in the lending business every day, and looking at a ton of credit reports, your credit-worthiness goes beyond your scores. Hence, I wouldn't let that one component deter you. It all comes down to your appetite for risk. More leverage, more risk, but certainly a higher return if the numbers work...what areas specifically, specific to Central Florida, are you looking to invest in?

Adrian Smude · Answer

@Mike Johnson which ever strategy works best for you to sleep well at night is the best one for you. I suggest you talk with many different lenders to gather some more knowledge and who will help be more creative. Lenders are free to talk, so use that knowledge. Pick who you feel most comfortable with and start collecting the checks like Ben said.

Benjamin Pekarek · Answer

Mike, Find a good property manager, find a good lender, and go on your merry way and collect your monthly check! End of story!!-Ben

JR T. · Answer

Possibly. It's not an overnight process. You're going to have to hang on to those all cash assets for a year or two or three to demonstrate to a lender that you're actually any good at making money off these things.Central Florida rental portfolio in the $900/mo range managed from another country? I hope you realize these sorts of rentals do not make the type of returns you're anticipating without investing significant time. It's a challenging business which is why we are paid so well when we do it correctly. Buy and hold is a solid, conservative investment strategy. Don't run out to a hard money lender who will price all the risk into your loan. That's not suitable financing for buy and hold. You need 5% interest or less and 10 year terms. At least that would be my risk tolerance.Where will you be living? Why can't you buy a rental there?

Mike Johnson · Answer

Thank you Ben and Aron!

Charlie Fitzgerald · Answer

We need to talk Mike. There is a much better,way to do this and leverage your current cash position.Thanks for the mention Ben!

Aaron Wyssmann · Answer

Anything is possible :) You will want to find a great lender to work with, specially in the area you are wanting to invest. That lender will know and understand their market and would be more willing to loan against the properties you are buying and not so much on you as an individual. You need to make sure that you present your best foot forward in speaking with a lender. Put together a nice folder of your finances as well as your intentions with RE. Dress nicely when you visit them and be as professional as possible, that will score you lots of points.Good luck.