Ive been approved for 150k now what?

Question

hey everyone i went to the bank and applied for a loan to see what happens and i was approved for 150k what would be the best move for me as i have never bought realestate before and have income only from my business.

Nicole A. · Answer

If I was just approved for $150,000, I would purchase a rental property. I would not buy notes with it, and doubt that'd be acceptable anyway with your lender. And it might not be enough (unless you partner) to build something from the ground up.

Just buy a rental property. Assuming you're in Louisiana, finding a property well under that should be easy. Don't look for properties priced at $150K just because you have that amount. Truly research a strong rental area near you. Look on Zillow at rental ads to see what people are getting for rent. Research the local rental laws. See if there is a REIA group in your area and attend if there is!

Don't just buy for the sake of buying. If a property is $100,000 and the rent you could get is $500, right off the bat without further analysis, you can tell it will *not* be a good deal. It would likely cost you each month. At a bare minimum, the rental income needs to be at least 1% (2% is much better) of the sales price. Only then, do you further analyze because it still might not be a good deal even if it passes the 1% rule test.

Use the BP rental calculators. You might have to ask around or guess insurance costs, or you could call a insurance company and tell them you're just trying to get a basic idea for research (so they understand that you don't need a full-on quote). They could probably give you ballpark prices on properties in a certain town/zipcode. This will help you analyze costs. As for property taxes, you could possibly look that up on the county/state website.

Finally, even with the approval, do you have cash for a down payment? Typically an investment property needs 20-25% down. And that's not including any closing costs you may have to pay.

If you want a smaller downpayment, you could purchase a property for yourself to live in. Then you'd only need 3-5% down....some lenders are even offering 0% down but there is a bit of an extra fee. You could live in a single-family home and rent out the extra bedroom(s). Or you could find a 2-unit, 3-unit, or 4-unit property....live in one and rent out the other units. There's a max of 4 units on this type of situation for primary residence though. You couldn't buy a 5-unit with a low-downpayment owner occupied loan. It'd automatically be a rental property/commercial loan.

Hope this helps!

Rami Jabbar · Answer

thanks for the responses guys

Eric Adobo · Answer

O-o. Ramos flip numbers don't sound like reality.

All in $90k and sell for $150k or more.

Robert Leonard · Answer

Welcome to BP @Rami Jabbar!  It sounds like you are approved for a loan to buy a house to live in.  That’s very different than if you were approved for a line of credit for $150k.  You will not likely be able to use that type of loan for a fix and flip unless you do an FHA 203k (that’s a whole nother conversation). A 203k is a type of FHA loan with purchase and repair funds, but for owner occupants.

If you don’t own a home, I think your best option is to buy an REO where your owner occupant status gives you a buying advantage.  These properties are available during an “owner occupant only” buying period.  That means you won’t be competing with investors.   These are very often in move-in condition or very near it.  Not all of these properties are a great deal, but they often offer you the opportunity to buy something below market value.

If your numbers on the deal you found are close, that’s a real investment opportunity.  Your profit projection uses “TV investment math” and that makes it very wrong.  You have to expect holding and transaction costs that typically run in the ball park of 10% of the gross project value.  Think about things like utilities, insurance, interest, taxes, typical consessions (seller paid closing costs for retail buyers), commissions, etc. - those things add up.

Rami Jabbar · Answer

yes i have the downpayment, the bank requires a 25-30% down i was thinking about using the loan for a flip i found a property for 65k it needs about 25k in repairs and houses in that area sell for $150-180k and some for even 220k with similar square footage im thinking to grab it fix it uo and worst case  scenario sell it for $125k thats $35k profit im assuming $25k in repairs bc the contractor said about $15-$20k and u never know if something pops out

Ryan Blake · Answer

It all depends on your goals. Are you wanting to create active work? Flip homes, wholesale. Do you want to be passive? Find a buy and hold property with plenty of cash flow to cover your property manager. Do you want to create? Look for vacant lots and get quotes on ground up contruction from a reliable GC. Do you want to not even deal with actual real estate? Buy notes and just collect on the interest.

There a lots of options. It all depends on what research you have done and where you feel comfortable.

Ive been approved for 150k now what?

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