Looking to purchase my second property

[Spencer Herrick]

   I've now owned my first rental property for about four months and am now looking to purchase my second property. What are my options in financing my second property with the least amount of out of pocket money and/or using the equity in my first property. I just want to make sure I'm not overlooking anything. I put 25% down on my first property so I assume I have at least 25% equity (especially since I bought at a great price). Thanks in advance!

[Nick Conley]

Spencer,

If you are moving in to the property you can do 5% down (given the other property was not purchased as a primary residence.)

Conventional loans allow you to do 15% down on a new investment property purchase. Some DSCR loans out there will also allow a similar down payment. A second home (vacation home) allows 10%.

[Spencer Herrick]

This would be a second investment property. 

[Corby Goade]

Assuming your DTI is in good shape, the easiest way to put the least down out of pocket is to use a HELOC on your current property as your down payment and conventional loan for the rest of the purchase.

Of course there is the rabbit hole of owner carry options too, but the above is the most straight forward option. 

Best of luck!

[Spencer Herrick]

Quote from @Corby Goade:

Assuming your DTI is in good shape, the easiest way to put the least down out of pocket is to use a HELOC on your current property as your down payment and conventional loan for the rest of the purchase.

Of course there is the rabbit hole of owner carry options too, but the above is the most straight forward option. 

Best of luck!

Thanks!

[Robin Simon]

Quote from @Corby Goade:

Assuming your DTI is in good shape, the easiest way to put the least down out of pocket is to use a HELOC on your current property as your down payment and conventional loan for the rest of the purchase.

Of course there is the rabbit hole of owner carry options too, but the above is the most straight forward option. 

Best of luck!

I would agree with this - its probably too soon / not economical to do a cash-out refinance at this point - options for freeing up equity would probably be best served via HELOC or something to that effect

[Derek Brickley]

Hey Spencer! Although you can try to move some cash around, typically as an investment you wouldn't have any equity to tap into yet. If it was a primary it would be different but HELOC's on investment properties have crazy terms and typically you're still capped at 75LTV. I'd recommend looking for partners to help fund the difference, from the lending side our hands would be tied.

[Katie Smith]

Hi Spencer! Look into a DSCR loan for your rental! You'll be able to get up to 80-85% LTV. Since you've owned your other rental for 4 months - you could also look into doing a cash out refinance to help you acquire this one.

[Nicole Barnes]

Hello everyone. I too am in the same boat. My first house I flipped and it was a success. I used a hard money loan for it and the lender was super easy to work with. That said, in searching for my next property I am finding a hard time wanting to do another hard money loan. For the obvious reasons-rates, fees, etc. I would also have to put down all of my proceeds from my first flip to fund the next one. I plan on doing another flip to build some equity. Long term I want to buy and hold. 

If the 2nd project would go as planned, I would profit the same amount I just put down for it. I want to scale, but all of these loans make it very difficult. I have no problem getting the loan and best terms I can get, it just prohibits me scaling.

For all of you who have been doing this for years, how did you find PML's. I know they say friends, family and neighbors. I don't really want to mix business with my personal life. Looking for any advice I can get. Again I am new, so I am learning a lot and I love it. 

Thanks in advance.

[Joseph Chiofalo]

Hi Spencer, 

Would this be for a single family or multi-family purchase? 

There are options that do allow for up to 85% financing on an investment property transaction. 

If you decide to use the property as a second home, 90% financing is available on a full documentation loan. 

Do you have a property in mind?