Financing and Other Things -- Newbie's First

[Ty Reyes]

Hello BP fam, name's Ty. First post.

Here to seek the collective wisdom of BP to help shorten my learning curve and minimize painful mistakes. Here goes (thanks to Chris Mason btw for this template):

Short Term Goal: 

To put the first property under my belt. My intention is to buy and hold long term.

2 duplexes with 2b/1ba (four units totals -- approx. 725 sq. ft ea) in one mortgage transaction; currently with tenants with rents at $425 ea. Market seems not to be far off at around $500. Per agent, Cap Ex repairs have at least 7+ years of viable use.

Asking price is $140k, zestimate is at $158k, Last 4 years of tax assessment around $121k. I'm hoping to get it for 10-15% less the asking. Property is in the east coast. I am in CA, thus an out-of-state buyer.

Per MLS (at asking price), P/I is $597; Prop tax is $139; Ins is $35 = $771 of known monthly expenses.

With 10% Cap Ex ($170) and 10% Property Management ($170); my initial calculations were:

Monthly gross of $1,700 / $20,400 Annual ------ NET: $589/ mo ; $7,068 / yr = Cash-on-Cash 23.56%

My financial situation:  

I have about $30k in various accounts that I can use as a down payment. I have virtually zero debt-to-income and have opted to continue renting and invest in rental properties instead of buying my own home. Also, I do not intend to live on any of the proceeds of my real estate ventures and hope to aggressively grow the portfolio in the next 5 years. My long-term goal is to exceed and eventually supplant my current projected earned wage (about $100k annually).

Purpose of financing: to purchase the above mentioned property 

Type of financing sought: thus far, it seems like I'm restricted to a few options:

1. Non-Owner Occupied - so far, I was told that underwriter reqs for this one is at least 20% down (which I should be able to cover but was 'denied' due to the fact that some of the funds are coming from accounts that have less than 60 days of verifiable banking history? Funds will be coming from a combination of a Roth IRA acct, Money Market, a cash-out refi of a paid-off vehicle (about $11k), and some physical cash.

2. Hard Money - I was told by the real state agent that he can assist with lining up hard money lenders to at least 'secure' the deal. I guess if I went that route, I can always refinance the property conventionally and pay off the hard money. However, I am not familiar with using one and am trying to avoid it as much as possible. One of the things I've heard about hard money is in addition to higher rates, they have pre-payment penalties.

Current or prior ownership of real estate: as stated, I am currently renting and intend to rent for at least another year or so.

Value of property at present and/or your offer price: $158000 (zestimate)

After repair value: $

Anticipated or actual appraisal issues: will perform one during due diligence 

Current rents per month: $425

Fair market rents per month: $500

Down payment or equity: $30000

Source of down payment funds, if applicable: see above

Income Source: Salaried/hourly W2, VA comp,

Gross monthly income (optional): $1800 tax exempt, approx $4-5k in base wage (+ OT opportunities)

Monthly debt obligations appearing on credit report, plus (if applicable) personal rent and alimony/child support/etc: $800/mo in rent

FICO: Excellent Credit issues: None. Scores of 797, 798, 807 as of today.

Whew....... all that said, kindly enlighten me with the ff:

1. Personally, those above returns look good (with a 10% Cap Ex and purchased at asking price). I'm curios for suggestions / different point of view.

2. If I do go ahead with this purchase, any recommendations on Non-Owner Occupied mortgage lenders? My conversations with a BofA broker/agent mentioned that I can NOT use any funds as a down payment if they cannot be verified to have had a 60-day history within a financial institution. That said, some portions of the projected $30k in DP funds will be coming from accts that satisfied said conditions. Others will not (will be deposited soon as lump sum)

3. If #2 is indeed a requirement, the agent I'm working with mentioned he can help me source a hard money lender. While I'm not exactly opposed to it, it's not my preferred method. If I do end up using it, what terms should I be looking for? Any lender recommendations?

4. Are there any other financial products out there worth exploring?

5. Any thoughts on paying the seller the asking price? Also, how can I effectively negotiate closing cost terms?

I'll post more questions if I get stuck... :)

Help a newbie make THE Leap. 

Thanks!!!

Ty