Financing options for the second house

[Daniel Qin]

Hello everyone, apologies if this has been asked before, but based on my research, for 2-4 units house, I don't see any good financing products that have down payment requirement as low as FHA. That's a problem if I'm buying 2nd house after a year. Am I missing something here, any suggestions?

[Wesley Sherow]

Daniel, 

FHA programs are truly amazing. Though not technically meant for real estate investors, it's often used as such due to it's looser requirements pertaining to the number of units that you can purchase through it. Fortunately there's many strategies you may consider.

1. Value add properties on a construction loan. You'll pay 20% of the lower purchase price of a distressed property, and using a construction loan get 100% of the renovation costs financed. Overall the cost to entry on this type of investment is lower, and you can refinance your money out once the property is done. 
2. Hard Money loan for closing costs. 75-80% LTV traditional financing, and 20-25% down payment financed also at 10-15% interest rate. Prioritize repayment of your hard money loan, consider doing so off of increased rents, etc. You'll still need a value add investment to succeed with this.

If you're willing to leave the city and invest in Upstate NY such as I do, the barrier to entry is VERY low, and easily that reluctancy on a 20% down payment on a $1-3M property becomes negligible, as properties upstate of similar size go for $200-500k.