All Forum Posts by: Matt H.

@Matt H. I would agree...this sounds like a great property. You may have to go with the hml for the full mortgage and then do a traditional refinance after the year to 18 month mark. I believe that's the more standard process. I hope you qualify and get this property lightning quick. Please let us know how things play out. Good Luck!

I'd also explore seller financing. 

Higher chance of success if this is a long-time, tired landlord that owns free and clear.  

What has your research found as to that? 

Running the numbers calculators are great and all, but the sellers situation and motivation can be as important.  

I am not aware of any HML that would go into 2nd position to make up for part of the down payment, even with a low LTV. I suppose somebody might, if the LTV was low enough, but most Lenders don't want to be in 2nd position. You may have luck with a friend or family member, or other private money lender, but it would most likely be expensive money.

And congratulations on having one of the most important issues covered - your monthly income (having plenty of excess). That's usually a big hurdle for many people. But, just because you can, doesn't mean you should. What I mean is, what is the big draw to get get this specific property. Is this a good deal. In real estate investing, you typically "make your money when you buy." Meaning, you buy a good deal, with immediate equity or a way to add value for additional equity. Or, is this an area where you really want to build a portfolio and similar properties don't become available often, or? 

This depends on your specific situation and goals. If you are just trying to build up a portfolio of good quality income producing properties, in a good area that will appreciate, and this one fits the mold, then it might make sense for your longterm goals. But, you do have an opportunity cost involved. If you are negative cashflowing (even only a year), you may tie up some of your resources, limiting yourself from pursuing a better deal that might come around during that time period. Or, you may open yourself up to other negative outcomes/expenses while waiting to turn positive cashflow. 

Generally, I'd say no, it isn't a good idea to do what you are thinking, but depending on your specific circumstances, it might work for your plans. I guess you can look at it as a retirement plan you contribute to, for a limited amount of time, until it starts paying off.

@Matt Haile

First you mention you get a hard money loan and will be -2100/mo first year and pay it off but later on you state you would pay off the HML in year 2

Look at it another way is if you had the $50k for down payment you would be out that but assuming you are paying 12% interest it’s costing you an extra $6k overall on the property

If it’s that good a deal would you pay an extra $6k for this deal is really the question in my

Mind

The numbers make sense but... what kind of loan is the mortgage going to be?  Need to be careful there that your primary lender (the other 80%) will be OK with having a second hard money loan on the property

If you can afford the negative cashflow then I would run the numbers as if you had put down the 20% and evaluate form there. The first 8-12 months performance don’t matter if you plan is 10+ years. 

Imagine you put down 20% but knew the property needed $50k in immediate work the first year no questions asked. Many “investors” would pretend that didn’t mean negative cashflow of $50k in year one. They would say they had positive cashflow before repairs. It’s just as honest to ignore year one while you acquire the rest of your downpayment. 

I also assume the property will be turning an actual profit and only negative cashflow because of your extra principle payment. Good luck.