Objective is to obtain properties via a conventional mortgage. Fannie Mae and Freddie Mac allow you to have up to 10 mortgages under their guides. These offer the best terms, in regards to rate, fixed 30 year term, and no prepayments. You can purchase with as little as 15% down. Ideally cashflow is the overflow goal, over time though 3-5 years-10 years etc, these principle balances will be reduced with payments from tenants, in addition the home prices will like be higher. At that point time once you have 10 properties, we would seek a commercial loan from either a local credit union or bank. These 10 properties would be paid off and combined into one mortgage. Freeing up you eligibility to purchase 10 more.
My position to fund this would be with a HELOC on your primary residence. This would be a line of credit that would allow you to draw on to either purchase homes ‘cash' or to use the money for a down payment. The terms on the HELOC are interest only for the first 10 years, and after that the loan becomes a 20 year amortized loan. We would likely either get a new HELOC 5-7 years down the road so that we have plenty of time prior to expiring in the draw period.
Scenario 1 ~ Purchase turn Key or Light Rehab property for cash at $150k from funds drawn from HELOC. ARV is $175k. Fannie Mae will allow you to refinance within the first six months and allow you to get back up to 75% Loan to Value up to the initial sales price. We would refinance a loan to $131,250.00. this would be a 75% of a position at the 175k Value. Take these funds and pay down HELOC, or use funds to acquire an additional property
Scenario 2 ~ Purchase full rehab at 100k with 50k in rehab. Using funds from HELOC to purchase and repair. ARV after repairs is 200k. Within first six months refinance up to 75% of the loan to value getting, however it cannot be higher than the initial sales price. Since the initial sales price is only 100k. would have to wait six months seasoning to cash this property out. Or at closing pay a general contractor the full invoice for repairs. After six months cash out to new value at 75%.
Scenario 3 ~ Purchase full rehab at 75k with 100k in repairs. ARV is 200k. Again first six months would only be able to take out 75k as that is the purchase. After six months take up to 75%.
Scenario 4 ~ Purchase Turn key property at 250k. Purchase as a conventional 30 year fixed with 15-20% down. Use heloc funds of 50k to 60k down payment. Use cash flow from the subject property to paydown heloc. You can use the HELOC funds as downpayment and purchase investment properties.
Scenario 5 ~ Purchase turn key property at 250k cash value is 250k. You can refinance within the first six months up to 75% loan to value, or after six months it’s the same. This allows you to pursue a cash property if you have to.
