Financing First Deal in Baltimore

[Mark McGarry]

Hi fellow Baltimore folk,

I'm having trouble deciding how to try and approach financing a first deal, bear with me while I lay out the situation.  I currently own a home in 21224 for about 3 years, the first 2 years of which I did a slow and steady "live in reno".  I converted the house from a 2/2 to a 3/3 by having the basement dug and then finishing it out myself from there.  I have been renting the basement now for 1 year and have the income on my tax return, although for just the basement it is not that much.

I'd like to look into purchasing another home that offers a similar opportunity for me to do a slow and steady live in renovation while converting my first home to a rental.  I like this idea because I can do a lot of work myself and really save on costs but I am a little obsessive and the result of that is that I work very slow (so not ideal if it would mean vacancy or slow get-ready to rent).  Running the numbers on my current home, including all expenses (maintenance, vacancy, capex)  and using a conservative rent figure (determined from similar rental listings),  my house should cash flow as it is.  

We have some cash saved and want to start looking for the next deal, but I'm concerned that we won't be able to qualify for another mortgage from a DTI perspective without being able to offset the current mortgage payment more than the 1 year of 1 bedroom rental income can do. Does anyone know of a good mortgage broker we can talk to who might consider the "potential income" of a lease? I think even if we could have 50% of the potential income from a lease considered we would be in good shape to qualify for another loan.

Alternatively, if I'm being crazy and there's a better idea out there, I'd love to hear it.  Look forward to hearing from some of you.  

[Account Closed]

If you have equity in this property - you could create your own loan - well sort of - Create your own mortgage and use that mortgage and note as the down payment - ask sell to take the note and also give you some seller financing.

• This is a classic nothing down with created paper.
• Let's say you have 30,000 in a property 
• Go to your friend title company, maybe Highland Title on Eastern Avenue, ask the title lawyer to create a mortgage on your build - be kind to yourself 3% interest amortized for 15 years.
• Next find a house you like
• Offer to give them the $30,000 mortgage secured by a second on your house with payments of X-$ (that you will be making) also ask if he can carry a small mortgage.
• Alternatively, if you can get a partner with equity, create the mortgage on his property, say for $100,000, but this time split the notes; instead of having one mortgage note for $100,000 have 4 notes for $25,000 each secured by the mortgage and the property -
• This way you have 4 opportunities to use these notes for down-payments.
• These concepts are a little creative - but they work when you understand how they work -
• Wishing you good luck.