Considering First Deal without conventional financing

[Max Briggs]

I started buying rental properties last year and purchased two in my area that have been profitable thus far.  I am looking to purchase another property but the house only costs $27k and I cannot find conventional financing for it.  I am considering taking out a personal loan from a bank at about 8.5% interest to purchase the home as well as make the necessary repairs (~$5k).  The term of the loan would be 3-5 years, which makes my cash flow go negative, but after the three years it would produce roughly $400-$450 per month in profit (after taking into account maintenance and vacancy).  I do not have the money to buy the house cash.  Should I take out the personal loan and use the profits from my other rentals to pay the loan back ASAP, or should I seek another means of financing, or should I hold off until I accumulate enough funds to pay cash, or find another home that I can purchase with conventional financing?  

[Sam Grooms]

If you asked this of 10 different people, you'd probably get 10 different answers. 

I'm weary of buying with negative cashflow. What happens if the house is vacant for a few months. Do your other two properties have enough cash flow to cover this third property?

I would find a lender in your area that would be willing to give you a loan that covers all three properties. This would make the loan high enough to appeal to the lender.