Commercial Real Estate Investing
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback
Updated over 7 years ago, 04/24/2017
I am 21 yrs old looking to purchase a multiunit property. Advice?
O am 21 years old living in Maine. Very interested in a 4 unit apartment complex with additional commercial space that is currently a turn key beauty salon in business. All 4 units are occupied. Four 1 bedroom 1 baths. In a small town in Maine. This place is in very good shape. This place will have 50% equity room. Purchase price is 60k, valued at 120k. Seller is old with prostate cancer looking to free up some responsibility. Real estate is cheap in maine so don't be surprised by the figure!
More importantly, my situation is.. I have never financed for any sort of mortgage. Tomorrow I will be attempting to finance to purchase this property. My credit score is currently 780 which I feel is excellent for my age. Past two years I have made 50k gross income, but currently my only proof of income today is a part time job making 15k gross per year. I have a 10k loan on a 25k valued truck. I also have 20k cash. What are my chances of getting approved for this loan? What are my financing options? What sort of rates and down payments should I expect to see? My biggest worry is my current income of 15k annually. BUT this property will be bringing an income on its own. What position am I in to purchase this property?
Thanks!
If your new to investing even an awesome deal can get ruined if your not knowledgeable. You need an experienced mentor fast. Connect with someone on BP in your area. Go to a local REI Group. Don't be to fast to get this deal. Some one famous one said. "The deal of the century comes along every week". In short, even if the deal is great, if your not greatly prepared; its not going be great for you.
Or you could get an option to buy it then bird dog it to another investor for a finders fee.
I feel I am fairly prepared. I have put the numbers together on a worse situation basis and I will still be making out in the positive by about 8k after my expected mortgage amount in which I will soon find out.. that is if I do get approved. My main concern is whether I would get approved or not. What are your thoughts on that taking into consideration my situation?
A traditional bank is going to have debt to income limits (usually around 40% for most loan programs) they are required to adhere to.
If you're currently making just $15K per year, your total debt service will need to be below about $500 per month... it'll be close on this deal.
BUT some lenders will be willing to consider potential income from the property itself. It will be some percentage of the expected market rent.
If the lender you're meeting with tomorrow doesn't work with you, shop around some. You'll find one who can do the loan if there's enough income from the property.
Are you going to live in the property as well? PM me details.
No I am not as all of the units are occupied unfortunately. I wish.. that would open up new potential for approval
Is there a property manger in place or are you going to be it?
How long are the current leases in place?
Hookup with a creative lender and get the deal done.
I am going to be the property manager. Its a 4 unit apartment and it would be my only one. I wouldn't feel it being necessary to hire a property manager until I get multiple properties.
Also yeah I may have to try a few lenders! Worried about what they will think about my 15k income.. although I have been at that part time job for the past 3 years
Andrew,
Try a few smaller banks in your area, go there with copies of 2 years tax returns, a sheet that shows your Net worth, copies of recent credit report ( even though they will check this themselves, it will show how serious you are ) , bring a breakdown of the expenses and income and what the profit of the property will do ( they may take that into consideration ) and see if you can get some breakdown from the owner to show their numbers too. go in there with confidence, show them all the papers and go over the property numbers. you have a real good credit score and that will help. Impress them with Numbers.
Thanks Patrick! That is the plan. I want to show how serious I am about this. I don't want the loan officer to have any doubt in me because of my age. I want to keep his confidence in my path. Its a big move for me at this age but I am confident. I have made a lot of "first moves" young in my life and I am ready to tackle this one. I want to get the ball rolling! I feel if I start young I have so much time to establish my portfolio.
I know Caribou a little, I used to work that area. If you can owner occupy one of the units it will help greatly. Do you know some of the local business people there that could give you a reference? Maybe Katahdin Trust would be a source if they go that far north. If it helps to refer me as assistant in managing that would be fine. I have had up to 250 units in Maine. A cosigner would be great if you can find one locally.
Ed Emmons, I was going to try the County Federal Credit Union, see how it goes. If all else fails, I would move to the next bank which would be Aroostook Savings and Loans. Do you think I have any chance on getting this loan? I likely will not have a co signer and my biggest worry is the lender seeing my 15k income. I have been at that job for 3 years though. This property will also bring in an estimated 10k/yr after all expenses including mortgage, tax, and insurance.
Another worry of mine is the size of the down payment. Should I expect to see closer to 30% or closer to 20%? Also, do they work with you on throwing closing costs on the loan instead of paying out of pocket?
Andrew. It sounds like there is some seller motivation here and in your area the ability to move property can be difficult. What about asking the owner to carry the loan...have you tried that?
Also if you need a place to live I would try to purchase the property with 1 available apartment...are the leases month to month? Can you or the current owner do cash for keys?
you have the down payment, even if you have to put down 25%. just go talk to a lender (s).
I can help you with financing inbox me