New member! Looking to invest in WV, PA, & MD

New Member Introductions
9yFollow

New member! Looking to invest in WV, PA, & MD

Katie K.
Morgantown, WV · Member since 2017 · 9 posts · 1 vote

Hi everyone!

My name is Katie, and I'm from Morgantown, West Virginia. From the information I've gathered so far, I've decided to focus on rentals. While researching REI, I of course came across the BP podcast and their videos on youtube. The first video I saw was a handheld live stream of Brandon standing in a kitchen talking a million miles a second. I thought "Who the heck is this?!" haha But the more he talked, the more sense he made. I've since become a sponge, soaking up all the information and advice I can, from various sources. The 4-5 books whose titles kept popping up again and again in interviews are set to arrive on my porch this afternoon! (thank you UPS tracking) So I'm pretty pumped.

Some quick facts:

  • I work full time.
  • I bought my first home last fall with an FHA.
  • My house appraised for ~$30k more than my loan amount, so I have a small amount of equity in the home already (I think that's how that works; correct me if I'm wrong)
  • I've already spoken to my real estate agent about viewing investment properties, and she said "Let's wait until you get pre-approved." Fair enough.
  • I spoke with my loan officer, and he was frank with me - I need 25% down on an investment property, period.
  • He came up with some creative alternatives, like buying a "2nd home" in a destination location, which only requires 10% down. Or buying another primary residence in the same town, moving, and renting out my current home. He can get that down to ~4% down.
  • I also came across HELOCs in my research. Since I have some home equity already, I could possibly use that to cover the 25% down on an investment property. Any advice on this is welcome!
  • If I could rewind the clock 6 months, I would purchase a multi-family unit with my FHA and house hack. Hindsight...
  • I also have an adjacent, but related question: Should I pay off my car, free and clear? I know that seems like a question for a different crowd, but it affects how much I can save for REI. I'm curious to know what others have done with their debt(s) to position themselves for REI. Is paying off your car a good idea? Because I have the money now, and it would put an end to the monthly payments. I just hate paying interest every month on an asset I can just own outright, especially when I'm venturing into REI. Any advice on this is welcome as well!

Thanks in advance to all who read this and offer some advice. This community is bursting with positivity and camaraderie, and I'm so excited to be a part of it now!

1Reply
22 views

Most Popular Reply

James Fisher
Investor · Morgantown, WV · Member since 2016 · 43 posts · 17 votes
9y

Hi Katie,

Welcome!  There are a few members from Morgantown and Northern WV area on BP.  Connie Bhimireddy is organizing a local real estate interest group meet up.  You may want to contact her and get on the invitation list.

1Reply
See this reply in the discussion

13 Replies

Jump to latestLatest
  • Igor Avratiner
    Investor · Philadelphia, PA · Member since 2015 · 69 posts · 28 votes
    9y
    Welcome to BP! And good luck! Regarding the home equity line most banks won't let you pull out 100% of the equity on your house since around 2008. Maybe they will do 80-85% CLTV (combined loan to value) is my best guess. So that means if your house appraised at $100k a bank won't open a line of credit if you already owe $85k (85% of the homes value) on your first mortgage. Depending on the interest rate on your car loan you may want to pay it off. If it's 0% or somewhere close it might not make sense. It's kind of all about the opportunity cost if you have somewhere better you can put your money that will pay more than what you pay in interest on your car loan (adjusted for risk) then go for it. If not maybe consider paying off the loan while you save more money every month not having to make a payment. Read the books listen to podcasts talk to as many people as you can, especially people who are active investors in your market and little by little things will make more sense.
    0Reply
  • Matt Bamford
    Doylestown, PA · Member since 2017 · 8 posts · 4 votes
    9y

    Welcome Katie- Newbie here too, looking forward to learning. 

    Minimum you need for an investment property is 15% not 25%, feel free to pm me if you want to bounce any other mortgage questions to me. 

    I've heard the Pittsburgh area has some good spots for investment properties...a lot of duplexes.

    Best,

    Matt

    0Reply
  • James Fisher
    Investor · Morgantown, WV · Member since 2016 · 43 posts · 17 votes
    9y

    Hi Katie,

    Welcome!  There are a few members from Morgantown and Northern WV area on BP.  Connie Bhimireddy is organizing a local real estate interest group meet up.  You may want to contact her and get on the invitation list.

    1Reply
  • Katie K.
    OP
    Morgantown, WV · Member since 2017 · 9 posts · 1 vote
    9y

    @James Fisher How funny! I actually came across Connie my first hour on this site! She sent me the meetup email, and I have the event on my calendar. Thank you for the heads up though. Are you going to attend?

    0Reply
  • Katie K.
    OP
    Morgantown, WV · Member since 2017 · 9 posts · 1 vote
    9y

    @Matt Bamford Thanks for the numbers! Is that a federal issues, or a state issue? Maybe the rates vary from state to state? I wonder why he told me 25%... And I was considering Pittsburgh because I used to live there, but I'm not sure if living far from my first investment is a good idea. Where are you looking?

    0Reply
  • Katie K.
    OP
    Morgantown, WV · Member since 2017 · 9 posts · 1 vote
    9y

    @Igor Avratiner Thank you for such thoughtful advice! I am paying interest each month on my car; in fact I make payments twice each month to keep the interest from growing too much between payments. It's not easy, but it's been worth it to see the principal shrink so quickly. I'll keep thinking about it.

    Do you recommend a HELOC for first-time investors? I know that my 2nd and 3rd properties will go more smoothly, so I can arrange repayment to my HELOC more easily. But right now it's looking like the best option if I want to get started this year. Otherwise I'll have to wait and save, but that can lead to stagnation

    Thanks Igor!

    0Reply
  • Patrick Kane
    Architect · Bethel Park, PA · Member since 2015 · 10 posts · 3 votes
    9y

    Just chiming in that 25% is pretty typical for 2-4 unit investments. However, if someone finds a lender comfortable with 15% in Pittsburgh, do not hesitate to send me their number!

    0Reply
  • Matt Bamford
    Doylestown, PA · Member since 2017 · 8 posts · 4 votes
    9y

    @Patrick Kane is correct in terms of investment properties per Fannie Mae guidelines.... 2-4 units minimum must be a 25% down payment.

    However, if you are thinking 1-unit minimum down payment is 15% 

    Keep in mind if you elected to do a rate/term refinance further down the road with that investment property most you could take out is 75% of the value for a fixed rate mortgage.

    A 2-4 unit cash out refinance it would be 70% of the value. 

    Hope this helps @Katie K.

    0Reply
  • Katie K.
    OP
    Morgantown, WV · Member since 2017 · 9 posts · 1 vote
    9y

    Thanks @Matt Bamford !

    0Reply
  • Ed Register
    Investor · Tornado, WV · Member since 2016 · 12 posts · 2 votes
    9y

    Talk with some local Community Banks, they have different lending standards as often they keep their loans in-house and do not have to comply with the Fannie Mae guide lines. I have done multiple loans with Community banks with fantastic terms. Also consider owner financing. If you can get owner financing from the seller there is no need to wait for your 'pre-approval' Realtors want you to wait so you don't waste their time driving you around. Go out and look for your own properties without the realtor you may find properties for sale by owner with owner financing. I purchased a 10 Unit apartment building outside of Charleston WV about 3 weeks ago. I got the owner to carry a second mortgage for 20% of the purchase at 5% interest. I got a community bank that would loan up to 85% of the purchase to provide me the rest of funds. I walked away with about 1400.00 at closing with putting no money into the deal at all. Essentially I got paid 1400.00 to purchase the property! The property cash flows and has room for improvements in NOI. As a bonus my wife got her Realtors license only to use on investment deals we do, since she was the realtor on this transaction she got another 5700.00 of commission at close that we put back into the company so effectively we got 7100.00 to purchase a property with cash flow!

    Read and learn all you can but don't believe anyone who says this is the way it must be done or it can only be done this way.  If you find the right deal and simply ask for what you want you will be amazed at what you can do.

    Good Luck!

    0Reply
  • Alex Manley
    Saint Charles, IL · Member since 2017 · 10 posts · 4 votes
    9y

    @Katie K. Welcome to BP! I am also relatively new here on the site, and I am going through the same process of finding my first investments. Since you mentioned you are looking to house hack, have you considered refinancing out of your FHA on your current house, and using a new FHA loan to purchase your house hack?

    With the right LTV on your current property, you may be able to refinance out of it into a conventional loan, allowing you to utilize a new FHA loan. While it seems your lender is not comfortable at a high LTV, there are lenders out in the marketplace currently doing as little as 5% down on conventional loans. All this is based on the assumption that you would keep the house you are currently living in, but rent it out. FHA requires owner occupancy of the property for at least 1 year, so you would need to move into the new property.

    Regarding HELOCs, @Igor Avratiner has it right.  Your average bank will typically not exceed 80%. You may get lucky with a community bank or portfolio lender that is willing to lend up to 90%, but those are rare, and interest rates can be very costly with so much leverage.

    Good luck on your financing hunt, and with your future investing.

    0Reply
  • Joe Pitrolo
    Investor · Morgantown, WV · Member since 2008 · 207 posts · 33 votes
    9y

    Sounds like you don't have a lot of equity to work with. I would consider saving up for a down payment and then looking for a property with 30 percent more or equity, such as a foreclosure or small fixer upper and that would cash flow after expenses and mortgage. 

       You may consider a basement apartment in your home or even renting out to Airbnb as a host for additional funds to save and also help you learn the business. Wholesaling or owner finance, mobile homes are also ways get into investing without a huge investment.

    0Reply
  • Katie K.
    OP
    Morgantown, WV · Member since 2017 · 9 posts · 1 vote
    9y

    @Alex Manley Thanks for the warm welcome! I just learned that I can get a new FHA after living here for 12 months. I can use the remaining time to live more frugally, save as much as I can, and research surrounding markets. I love how many options there are for this type of investing!

    @Joe Pitrolo You're right, I have less equity than originally assumed, so I'm just gonna have to get more creative with this. I'm considering getting a new FHA after living in my primary residence for 12 months. Currently, I have a basement, but it's unfinished. Thanks for the advice!

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free