Looking for advice on financing a low-cost rental in the Midwest.

[Andrew Neel]

Long time listener, first time poster. I have a scenario here that I feel like the lending industry (and possibly also myself) is making harder than it needs to me. 

Tri-plex in the midwest:

Older house, dated, but well taken care of. New steel roof, new siding, belonged to an older couple, kids trying to settle the estate.

Price: $59,999

Conservative rent estimate for entire property: $1500 a month. (I'm estimating on the low side, even for this area)

One unit has a long term tenant (11 years and has no plan on moving and has nothing bad to say about the place. The other units need a weekend's worth of work to be move in ready, little trim paint in one, 1 room needs carpet in the other. So this tri-plex is like 90% turnkey. 

Looking at conventional financing, the wife and I will not be house hacking it. Talked to a conventional mortgage lender who we have used twice before and sent many people do, they don't do investment properties. Quicken Loans/Rocket says they do, but then come to find out, they don't do anything under $200k right now, according to them. Talked to local, moderately sized credit union that my auto loans are through that I have a great relationship with. They wont touch anything under $100k. Better.com says they do investment properties, put in all my info, it "pre-approves" me for 80k right off the bat. I put in my requested amount, no loans available... Messed with the numbers, changing the amount of 60k all the way to 80k, more and less down payment, etc, still says "you are approved, but no loans currently available". Talked to another local credit union, this is the only one that sounds promising, they unofficially said they should be able to do it, around 5.25% with 35% downpayment. I can come up with about 16-17k without things getting tight, via 401k loan, towards the down payment. My father has a duplex (mainly from listening to my real estate ramblings for the last couple years and he ended up getting his first deal before me!), he is interested in working out some kind of partnership if we need to cover this 35% down payment. (perhaps just hard money loan from him, or perhaps actually a partnership with the actual deal). Right now that seems to be the only option. Unfortunately, due to paying down debt, in preparation to get into real estate investing, I don't have a huge amount of cash reserves at the moment. To finance his duplex, Dad used the equity in his personal residence, which I would do if it were an option, but we have only been in our current house for a couple years, and I only have ~18-20% equity in it right now. The idea I brought up to dad, is to use the equity in his duplex to contribute to the down payment on this triplex, obviously compensating him fairly, not trying to get a handout. I'm also not opposed to using a hard money lender if that's an option. But if I'm paying someone, it might as well be my dad. 

I'm still doing some research on other methods of a conventional mortgage, but maybe I'm overlooking some non-mainstream organizations? Is it really that hard to find a company to accept a down payment less than 35% on a sub-100k property that cash flows well? Seems like a no-brainer. 

I'm learning how ***-backwards the lending industry is (to me anyway). It's so ironic to me how much easier it is to get financing on a single family personal residence that the lender is hoping you don't lose your job, VS a income producing property that is making like 4-5 times what the mortgage is... I could have 33% occupancy and make the payment and utilities....