How to fund this deal?

[Austin Wood]

Hello BP! Im here because I need advice. There is a duplex and a triplex in Wooster Ohio selling for 69,900 each, and I want to offer 130k for the two of them. Monthly cashflow is $3445 combined. I have 20% to put down (gift) and a 680 credit score. The problem is that my debt to income ratio is too high to qualify for another conventional loan (income from my first duplex doesn't count for another 1.5 years because I haven't been a landlord long enough), and all of the hard money lenders say these properties are too cheap for them to lend on. Where do I go from here? Thanks in advance for your responses!

[Mark Safrin]

Consider taking that 20% down and instead find a single property that also has great cashflow. Eventually, once you own a nice chunk of the equity, you can pull out said equity to pay for these smaller deals if you still want.

Of course if that first Duplex you mentioned has sufficient equity in it, you can always pull some equity out of that.

My inbox is awash with offers to borrow on smaller properties. There is a reason we have minimum loan sizes. For us and many other HMLs that loan size starts at $75K. Some have higher minimums, very few have less. If the total loan costs are not somewhere around 7K+, then lender overheads are quite possibly not being covered and you have to wonder if it is legit.

Instead of being mesmerized by low worth properties with an apparently nice cash flow, consider instead looking from the get-go for investment properties that HMLs will be happy to lend on? That means an LTV of $100K+. Of course $200K would be even better. You can then keep churning the equity.

Best wishes in your endeavors.