Good Credit and Down Payment but Low Income: What would you do?

Question

Kedian Jimenez · Answer

you are just going for hold strategies at the moment? I would say for you to build some capital up. Whole selling, rehabbing. However there are definitely other ways. You also have an advantage like  receiving assistance.... use it. There's a reason GOVT gives financial incentives to investors. we are solving the problem they have a hard time doing on their own, and thats providing new housing and raising the value of the area.

nother option would be Hard money. It would be more expensive but its an option. If you find really good deals 40-50 cents on the dollar then its a great way to purchase homes when all other options have been exhausted. Maybe even looking  for partners to finance and you do all the work.

you can always sandwich a lease to buy option and or actually do subletting. all those require relatively little investment on your part and can provide a decent income starting out. Thats how I became rent free in NYC.

Nicholas Junker · Answer

Reece

Im in the exact same position.

I have a decent credit score, $20k+ for down but very low income for the past year and can't qualify for ANYTHING!

Just chatted with an investment broker yesterday thinking that THIS IS IT, but my main problem is debt to income ratio.

I don't hold any auto payments, cc debt, college loans but when looking at the expenses of a property (mortgage, hoa, taxes, insurance) plus personal expenses (mainly rent from primary residence) all that debt adds up to quite a lot more than my income.

For an investment loan you need your income to be 2-2.5x the debt of the property your investing in. Basically, I need to cosign with someone to add to total income thus making the process more complicated but maybe if your area is a bit more affordable than mine, you would not need a cosigner.

A mortgage broker in my area recommend an investment loan broker for me to talk to and the meeting was helpful so maybe look into that option.

some examples on properties in my area:

$240-280k 2bd/2bth 1980's condo's with rooms renting from $700-1000 depending on location and condition

$330k+ 3bd/2bth condo's/homes with same rent

$400k+ 1940's single family homes that need A LOT of work but again rent could be as high as $1200 p/room

Karen Margrave · Answer

@Reece O'Bryan You might want to look at other options for using your money. Some of the crowdfunding sites allow smaller investments, but be sure to do your research on them.

Also, you didn't give much information. What is the average cost of a home in the area where you live?

Jake Thomas · Answer

@Reece O'Bryan why is your Debt to Income so bad? Do you have a bunch of consumer debt, car loans or student loans?

This is the most important factor is getting a loan from a bank, sometimes paying off some debt will help. Also, you can get a new job or a second job to increase your income if debt isn't the issue but you are severely underpaid. I took a second job last year (realtor) and doubled my income last year and it made the difference from me being able to buy only 2 rental properties to being able to buy 5 based on my income.

Bryan Drury · Answer

@Reece O'Bryan,I think we need more information on your goals,competitive advantages,previous experience,ect before offering advice.What are you  wanting to accomplish?Thanks

Kedian Jimenez · Answer

1. "Lease to Own option": essentially means you are leasing the how with the RIGHT to buy the property after a certain period  You are not required to buy it but you may buy it at the specified price at the time of maturity. (Lease purchase would mean you are agreeing to buy it at the end term)

2. Subletting just means you go through the normal procedure of renting a home and then you just move in another tenant to cover the rent and a little bit of a markup. I'd recommend getting under market rental units. "Lease to own" means you'll lease for a time to eventually own it. as subletting means you will just rent for a time with no option to buy. "Lease to Own" usually involves a premium up front and even a higher markup in the lease as opposed to a rental because you have the added advantage of having the right to buy (like 20% in some cases but check your local market and professionals to be sure).

Subletting: I.E you rent a home for 1000/mo for 1-2+ year terms. you can get a sub-tenant for $1100+ depending on market which is a 10%+ ROI per month

Lease to buy option: I.E you lease to buy option a home for 1000/mo with the option to buy it for 100K at the end of three years with a premium up front of 2K. You can get a buyer to lease the same for $1200+ and charge a premium of 2.5K-3K+ and they can purchase the home landing close but after your purchase at 110K. that means you made a net profit 200+/mo (20% ROI), 500-1K premium (25%-50% ROI), 10K resell (10% ROI).

If they dont buy then you can come out of yours as well or you can just start up a new one. and hey you might have the added bonus of appreciation at that point.

Real investors make the money at the beginning. So go for a good deal first. you'll do fine.

if you need further help putting subletting together let me know. Ill help.

3. Hard money terms is up to the hard money lender. They'll let you know. The point of hard money is not the rates or the price. It's the convenience. Fast, no checks, and usually based on the value of the property. I would use hard money to get the many deals you want. Make sure its enough to cover holding costs. wait until its seasoned in 6 months and then refinance with a traditional loan. If the deal is good enough then you should have very little risk doing it. it's just another tool.

4. I can help you in wholeselling if you want its one of the low risk capital building techniques. its just you finding deals with enough of a profit for you and another investor to get it off you at a win win.

Chad Duval · Answer

If it was me, I'd look for a property that has more than 4 units. The bank is more concerned about the finances of the investment and less on yourself. If that doesn't work, look at someone who is advertising seller financing for a 5+ unit building. The same thing applies, but the seller is usually less strict than the bank. They may be willing to hold a second mortgage (at a higher rate) to make up for your lack of funds for the down payment, but you need to find a way to build credibility; i.e. business plan, employment history/resume, website...

Good Credit and Down Payment but Low Income: What would you do?

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