Grade my Funding Possibilites

[Cliff Rosa]

Getting into the whole game of real estate. Right now, I have about 10 months before I come home from Iraq and I plan to start investing in Real Estate. Going to try and learn as much as possible in the next year.

This is my situation. 20 y/o that owns his own home, never missed a payment on anything. No credit card debit, no car payment anymore. 25k in savings and I have a job. Currently my credit score is 735. By the time I get home I hope to have found that one really well priced home to buy and rehab.

My question is, how is it looking for me to get a loan? I would be comfortable with putting about 20k down on a 80k property and financing the rest. When I bought my home, my mortgage started about 2 months after I moved in. If I qualify for another loan, will I be able to have my mortgage start a month or two after I close? Say I put 20k down on the home, how likely would it be that I can get a equity line of credit as soon as possible, possibly the next day?

[Jon Holdman]

With a job, good credit, and the down payment, you should be able to get the loan fairly easily. The key remaining factor is your DTI (debt to income). Not sure what lenders limit this to for investment properties, though. You should start talking to lenders in the area where you'll land. Your best bet is to start building a relationship with a smaller, local bank that does investment real estate loans.

Your chances of buying a house with an 80% loan then getting any sort of equity loan on that property are zero. Lenders will not consider that property to have any equity. Even if you were at 50% LTV you would have a hard time getting another 20% loan. After you owned it for a year, you might be able to refinance at 70% LTV and get some cash out. Lines of credit (second mortgages) on investment property are non-existent right now.

You might try looking for a hard money lender or private lender. The rates will be much higher. But they would lend based on the ARV, at least in some areas. With some cash in hand, a job, and good credit, you should be able to get a good deal funded.

"A good deal" is key. For a fix and flip, a good deal is one where the purchase price plus fixup is under 70% of the ARV. If you can find that, and with your cash in hand, you should be able to find a lender who will do your deals.

If you work on that relationship with a local bank, you may be able to get a construction loan or even a personal line of credit. If you combine that with a conventional mortgage, you may be able to do your deals that way. That will be much cheaper than hard money.

Something to consider is the best fix and flip deals are often very junky houses. Conventional loans are hard to get if the condition is too bad. Hard money, construction loans, or some other source may be your only option.