buy and hold, flip, or emotionally attached?

[Joel Carrasco]

A neighbor urgently needs to sell their home due to medical issues & moving out of state. They want to sell for around $235,000. It’s a 2 bed / 1 bath historic home near central Phoenix, AZ. My home is also historic & I’ve done a lot of work on it, which I don’t mind. The home needs work, maybe $15,000 in repairs. A recent appraisal was $275,000 in it’s current state. Homes in our neighborhood that are move-in ready sell for around $310,000, so it seems to be a good price. I want to get into the real estate business to own rental properties long-term. I want to offer $220,000, make the $15,000 in repairs and rent it for around $1,650 per month. Cashflow will be about $60 (Mortgage $1,143 – Taxes $183 – Insurance $80 – Vacancy 5% $83 – Repairs/Maintenance 3% $50 – Management Fees 3% $50 Total Expenses $1,589). This looks good for the area and I want to hold onto it for the long-term as well as acquire more properties each year.

The problem I am having is financing. I can get a hard money loan for the few months it takes to rehab the property. But when it comes to refinancing, how can I refinance it?

My debt to income ratio is already being used up for my own home’s mortgage and student loans, so it doesn’t look like I could afford another mortgage unless the new properties’ rental income is counted. I talked to a lender and they said in order to count rent as income to help with financing I need a 1 year rent history of a property.

I plan to open an LLC to establish a rental property business. I am willing to get very creative and I know I'll probably pay more because it is my first property.

Is there some way to count projected rental income as income?

Could I get a renter in during the hard money loan period and extend it for a few months to prove income to take to a bank?

Should I bring a plan to a regular bank to see what they might do before I get under contract?