Financing a rental

[Account Closed]

I talked to the mortgage lender who helped my wife and I buy our house, and told him I wanted to rent out my current house and buy a new one. He said that I could do so with 5% down, assuming that my wife and I qualify, i.e. can prove that we are able to make two mortgage payments. I have massive student loan debt, but since I plan to rent out one of the houses, I know we won't have trouble making the payments, assuming all goes as it should. Since I don't think we will qualify based on our combined income, is there any other option for us to get another property? We are looking to either rent out our current house or buy a rental. Thank you!

[Nuhan Demirkan]

Boyd, most lenders have overlays that will exclude the potential rental income from your current home since you are not a seasoned landlord. It usually takes 2 years to have that income included. My suggestion would be to follow Ivory's advice on owner financing. Concentrate on tired landlords. It would be difficult to get owner financing from an equity seller. They probably need the money to buy their next home. However a tired landlord likes the idea of receiving monthly income without the hassles of tenants, termites and toilets. I have purchased 4 homes using this type of financing. You can negotiate everything from interest rate to frequency of payment to payment start date. On one of the deals the seller agreed to hold off on receiving payments until I rehabbed the property and put it on the rental market. Good luck in your investing...

[Ivory Hayes]

Hey Boyd, there's always the option of owner financing. You could always offer to buy someone's home and inquire about them financing you to do so. I have yet to actually do a deal such as this myself but I'm currently in the market for such a scenario and am diligently looking! It'll probably take the right situation for a person to extend a potential buyer credit on something they already own, but I know it is possible with little to no money down at that. Then there's always the option of a private money lender. As long as you work the numbers to the T so that you can truly understand what you're getting in to financially, that's an option. Or there's the possibility of taking on a partner. There are many vehicles you can use to get you to your destination, you simply have to sit down, do the homework and figure out which option is best suited for your particular position. I hope this information was at least some help buddy.

Happy Investing...

[Upen Patel]

@Account Closed What you need is a lender that will give you rental income credit based on a lease. In this scenario you will get 75% of rental as income to help with you DTI.

The better way to move forward is to rent the current house and buy the next one as a primary residence. That way the new rate/terms you get are more favorable.

You might want to investigate to see if there is a way to reduce your student loan payments.

[Ingrid J.]

@Account Closed Welcome to BP! 

It's great that you may get a mortgage for a rental. Be sure to save up a solid cash reserve in advance beforw buying anything. And educate yourself on what makes a good deal in your town. 

Best of luck.

[David P.]

Hi Everyone,

I have a signed contract for a three unit property for 43,500 the rents are 2100.00 a month and the insurance is 85.00 month I have to pay electric and have the last 6 months none over 350.00 taxes are 625 yearly. What I need is a short term loan so I can season it and get permit loan I asked for an extension close is on the 8th Jan, the company I was talking to flaked after I signed the docs said wasn't enough in it for them wish they had said something before hand. Is there anyone here that can help me. I have 15,000 to put down little more if needed.

Thanks,

Electirc

[Nuhan Demirkan]

Boyd, most lenders have overlays that will exclude the potential rental income from your current home since you are not a seasoned landlord. It usually takes 2 years to have that income included. My suggestion would be to follow Ivory's advice on owner financing. Concentrate on tired landlords. It would be difficult to get owner financing from an equity seller. They probably need the money to buy their next home. However a tired landlord likes the idea of receiving monthly income without the hassles of tenants, termites and toilets. I have purchased 4 homes using this type of financing. You can negotiate everything from interest rate to frequency of payment to payment start date. On one of the deals the seller agreed to hold off on receiving payments until I rehabbed the property and put it on the rental market. Good luck in your investing...