Advice: Hard Money Lender VS Conventional VS FHA

[Jordan L.]

Please let me know what will be my best option. I been on this site everyday, getting all the information I need to make my move. Whats going on with me, I am currently saving and looking for my first rental property, that I would like to live in. I am paying so much in rent, its time to own. I am in the Florida market. Some investors say do a hard money loan and then refinance, others are saying Conventional is the way to go, to see how this all works. I have also heard go through a portfolio lender for my first deal. I really wanting to do a FHA loan but I am skeptical of the PMI, so I thought about Homepath Loans., I don't have a 20% down at the moment to do conventional loan. What would you do if you were starting today. Lets say if today was your first day?

[Buddy LaRue]

Originally posted by @Jordan L.:

Please let me know what will be my best option. I been on this site everyday, getting all the information I need to make my move. Whats going on with me, I am currently saving and looking for my first rental property, that I would like to live in. I am paying so much in rent, its time to own. I am in the Florida market. Some investors say do a hard money loan and then refinance, others are saying Conventional is the way to go, to see how this all works. I have also heard go through a portfolio lender for my first deal. I really wanting to do a FHA loan but I am skeptical of the PMI, so I thought about Homepath Loans., I don't have a 20% down at the moment to do conventional loan. What would you do if you were starting today. Lets say if today was your first day?

Jordan,

Everything should boil down to the numbers, and let the numbers make the decision for you.

Hard Money Loans or private money loans are good, but in my eyes they work best if you're getting a knock out deal on the house with plenty of capital gain to be had after repairing the property. I've sold a number of properties using HMLs and after refinancing (after repairs) many of the investors I worked with had ZERO out of pocket into the deal...but only because of the amount of capital gain they could get out of the deal (these were all in the Houston, TX market area). In SoFla, these are extremely hard to find.

A conventional loan is fine if you have the money to put down....keep saving if you want to go that route.

As for FHA loans, you have a low down payment and do have to pay PMI, but you'll get into a property. With FHA, you can purchase up to a quad and still get the FHA financing. This may be the route to want to take due to the low down payment, other units in the same building that pay your mortgage and PMI, and maybe still cash flow (always check your numbers). Even if you only break even on the numbers, you won't be paying someone else's mortgage, and hopefully you can/will take the money you've been paying in rent, saving it, and buy more cash flowing properties. Sounds like a win-win to me.

As for Homepath properties. Be careful with these. Yes, you can often get into a property with a low down payment (supposedly 5-10% down, though to get that is a major pain in the A**, and the investors that I know of who have tried that route ended up having to put closer to 15% down), but what I've been finding in SoFla is that most of the Homepath properties are overpriced, so to get a decent deal you have to find a property that's been on the market a few months, with the price being dropped a few times before it is low enough to even be reasonable for the condition; and that condition is most likely not going to be move-in ready...thus the Homepath Renovation financing.

PM me if you would like to discuss further.