Financing an Investment Property WITHOUT Putting 20-25% Down

[Account Closed]

Hey BP, I'm looking for some advice 

I'm looking to purchase a property in a cheaper market a few hours away (I live and work in the Orange County, CA area, which tends to be a pricier market). 

Initially, when learning about financing options, I thought about going the FHA-route but I figured that won't work due to being a non-occupant. Further, I've been told that financing an investment properties typically requires a 20-25% down payment. Is there a way that anybody knows for me to attain a loan for an investment property without forking over 20-25% on a down payment? I'm trying to put as little money down as possible and leverage this property. For what it's worth, I make a good salary, have 790-800 FICO score, so I don't think qualifying should be much of an issue.

Thank you in advance!

[Dustin Verley]

@Account Closed A couple things I've noticed. Your main dilemma here seems to be the lack of a down-payment. Which is completely understandable. Have you thought about taking on a private investor (or investors) - you know? Your doctor, the dentist, the nice old lady who has funds sitting around begging to be used, or even the auto mechanic who does work on on your car? Work with these individuals, I'm sure they would love a great return on their money.

Second, as many suggested, consider a live-in hack. You mentioned that you rather continue to live "rent-free." The problem is that living rent-free isn't necessarily generating any income or equity for you. Even with a live-in hack, the money you're paying in is (a) Building your equity in the home, and, (b) If you're renovating while living in, you'll get the tax benefits, as well as the force appreciation, more equity for you.

Eventually you can rent it out for a stable cash flow and refinance on the original home to utilize for your next property.

Or, you can always entertain the idea of a MFH (less than four units) - you live in one, and use the potential income to supplement qualifying for a mortgage.

These are very loosely-given suggestions, and your due-diligence is of the utmost importance. Take your time and don't rush and make sure that the first property you get is a GREAT deal!

[Carlos Zapata]

Originally posted by @Account Closed:

Hey BP, I'm looking for some advice 

I'm looking to purchase a property in a cheaper market a few hours away (I live and work in the Orange County, CA area, which tends to be a pricier market). 

Initially, when learning about financing options, I thought about going the FHA-route but I figured that won't work due to being a non-occupant. Further, I've been told that financing an investment properties typically requires a 20-25% down payment. Is there a way that anybody knows for me to attain a loan for an investment property without forking over 20-25% on a down payment? I'm trying to put as little money down as possible and leverage this property. For what it's worth, I make a good salary, have 790-800 FICO score, so I don't think qualifying should be much of an issue.

Thank you in advance!

 You can use OPM,  you will find a private lender that can give you the 100% of the deal,  he/she could be one of your friends, etc 

[Lynsey Dreis]

Andy S. Where are you looking to invest? I am also a new investor with a similar situation in the Tampa, FL area.

[Dee Schwarts]

Most people say HELOC, but assuming you can't do that you could try to get cash out on your auto, use secured and unsecured business credit cards. What you do is set up a holding company that is a separate LLC then rather than do cash advances you just do normal transactions. You want to do one that has a low monthly fee and a low fixed fee of under $1 per transaction. If you go with the ones that are 1-3% per transaction thats not really a good deal. There's prob other products out there if you just do some research. I haven't personally done this but Juan Pablo on youtube has used this method to get several units. If you can't get a commercial deal use this method to put 3% down on a residential deal or a 4 plex and do house hacking or vacation rental.

Next you can use the cashflow to get more residential properties. Once you have 4 residential properties you can get up to 100% LTV on equity lines of credit to fund your commerical deals.

Some people recommend selling your deals and doing the 1031 exchange.  Personally I'd rather just get equity out and continue to collect cashflow on the residential deals, pay off the equity lines and continue to get more deals etc.

[Grant Rothenburger]

@Account Closed I am just echoing some stuff others have said. Can you use a HELOC, equity loan, borrow from family in exchange for a fixed repayment, or someone else to borrow from? Or seller financing of course.

[Account Closed]

Be cautious in an up market about being highly leveraged.  Properties can make it through a recession if the rent covers the payment .... if they can't, you'll be adding to the rental from your day job and you won't like how that feels.

There is a reason banks want at least 30% down on investment properties.  40-50% is really better.  

[John D.]

If you are considering a vacation / short-term rental, you can likely finance it as a second home with only 10% down.

[Ruchi Patel]

Hi anyone have a lender's contact info for financing investment property with 20% opposed to the Fannie Mae 25% requirement. I live in New Jersey

[Vinay C.]

@Account Closed Curious to hear how your story turned out since you made your comment a year ago. I am looking for a loan with a low downpayment as well and wanted to hear your progress. Thanks