Double trouble-how to creatively buy a second property

[Brittany Roley]

Hello!

I currently own a home in my name used as a primary residence in the hot Denver real estate market. Houses are going like hot cakes but I sense a small downturn approaching.

My fiancé and I found a property we would like to buy in both our names but would need a down payment. We have been prequalified for up to 417 with 10% down. . .and are working on the preapproval. If we sold the current house we would be hoping to make a profit of around $70,000.

 The only way we are thinking we could get that down payment money for the property we are looking to buy would be through the sale of the current home. However,  I would love to keep it as a rental but not sure if there are options or creative financing strategies out there that could allow this and still buy the other property. Any ideas or suggestions from BiggerPockets would be greatly appreciated. :) I'm still kind of new to the real estate game so I'm looking at this as a possible investment and learning experience! Thanks!

[Scott Trench]

@Brittany Roley So I have a little trouble with your logic here. You believe that there is a downturn coming, and you state in this post that you do not have the financial capacity to comfortably keep both your current property and this next home without leveraging Other People's Money or using creative finance.

Creative finance is great, but it only works if you are getting a great deal. If you think the market is about to collapse, then you aren't getting a great deal. When you get a lousy deal, creative finance and leverage can make it a truly horrible deal.

Now, if you love the new place and want to build your life around it, then by all means, make sure to get it, love it, and live it. But, if I had your current financial position, I would be wary of leveraging in this market on two properties at once like this. 

I think that the best time to buy investment property when you aren't 100% convinced that you are getting a fantastic deal (which, by the way is exactly what you are doing - by keeping the first property as an investment instead of selling it to pay the downpayment for the new one, you are essentially buying an investment property) is when you are financially prepared to make that purchase. 

In this case, proper financial preparation would mean being able to comfortably cover the downpayment(s), make both mortgage payments with existing stable cash flows - either from jobs, rents, or other investments, and having a nice cash cushion to cover the expenses. 

My $0.02.