Buying My First Time Income Property Road Block

[Andrew Jacoby]

I am currently trying to purchase my first investment property in Nashville.  I have been educating myself on real estate for over a year now and have been working with a realtor for a couple months.  I am ready to purchase my first full time income property.  Ive already hit a number of road blocks but my most recent one has me stumped.  Im hoping to get some creative answers on how to overcome this scenario.

My scenario is a little unique, as I currently have been renting out my primary residence part time on Airbnb for the last 1 year of 4 months bringing in 3,000 a month conservatively($4,500 this month, which is a record for me). Unfortunately because it is my primary residence and it has not been two years Fannie Mae regulations won’t allow me to count that income towards my debt to income ratio of 45% limit. With my conservative $40,000 dollar a year full time income and my mortgage payment of $1050 a month this leaves me with little buying power to buy a full time investment property.

Some other relative info about my financial status is that I have a good to great credit score, I currently have $20,000 available to invest leaving me with a cushion in savings and because of my Airbnb income I am currently able to save about 80% of my full time job income yearly. I also have a private lender set up who is willing to help fund an investment property upwards to the limits of $50,000 on top of my $20,000 I have currently saved. The catch is he would not want to be on the mortgage but would require having a second position on the home after the primary lender.

My goal is to expand my Airbnb business to a second home buy purchasing a full time Airbnb. I have already located a townhome that is eligible for full time non owner occupied short term rental and currently listed at $250,000 dollars.  For those not familiar because of new laws in Nashville, homes now must be zoned uniquely to be eligible for full time short term rental, making them harder to find.  I have heard that my best route is to find a private portfolio lender who does not have to abide by the stricter 45% debt to income ratio that Fanny Mae and Freddy Mac do?  Is this my best option?  Are there any other creative solutions to finance a deal like this.  Id prefer not to wait the 7 more months till my primary home can start counting towards my debt to income ratio.  Thanks for all the help?

[Dan Beaulieu]

@Andrew Jacoby Many Nashville investors are flocking to other TN cities where cash flow is possible. Knoxville and Chattanooga still have a TON of great deals, and many properties far exceed the 1% rule. I personally invest in rental properties in Chattanooga, using cash or hard money to purchase / rehab, then refinancing with local banks to get all of my cash back or the HML paid off.

Purchasing with a solid HML will limit your initial cash outlay, and your refinancing bank will count your new built in equity as your down payment. In this way, your 20K can go a long ways towards building a massive rental empire.

Investors in these markets are finding a ton of great deals. They are buying from wholesalers, REOs, and sometimes right off the MLS! I'd be happy to hook you up with some local wholesalers and discuss those markets more with you. Feel free to reach out any time!