Time to strike!!!

[strive4credit]

Houses in my area are going dirt cheap. I already own two properties. So I am looked at as an investor and required to make a sizable down payment 20 - 25%. I want to try to find a way to avoid taking that kind of hit.

I got two pre-approvals so far. My credit scores are good. I want to use other people's money. What to do!?

[jq26]

I'm unclear what you are trying to do. I think you have the right idea (time to strike) but you are asking for someone to take all the risk and not label you an investor (which you are) and require a sizable down payment as skin in the game.

Hard money lenders will take on investors with little down, but expect 3 points upfront and a 10% apr. I know one in the Philadelphia area and he's probably worth $20,000,000 for a reason, so don't recommend it.

All lenders will require a minimum down payment of at least 10% on a non-owner occupied property, and at that small of a down payment, expect to pay a much higher rate than advertised.

These rules are to protect you & the lender. If homes drop another 15%, which is definitely within the realm of possibility, that will make it likely you still have equity and that you won't destroy your credit, impair the bank's balance sheet, and skip town.

Other than that, beg family members for the "gift" money you will need to get your down payments. That's what I did in order to get 20% down late in 2009. I am still paying it back at 5%apr, which beats the pants off a 1.2% CD that is being offered right now and saved me tens of thousands in additional interest and mortgage insurance.

[oldguy47]

Banks sometimes will work a deal if you buy one of their properties that they have on their books (foreclosure/reposed). Other than that you could rent your current home and move into the new one.

[2ndTimeAround]

I'm unclear what you are trying to do. I think you have the right idea (time to strike) but you are asking for someone to take all the risk and not label you an investor (which you are) and require a sizable down payment as skin in the game..... expect to pay a much higher rate than advertised.

These rules are to protect you & the lender. If homes drop another 15%, which is definitely within the realm of possibility, that will make it likely you still have equity and that you won't destroy your credit, impair the bank's balance sheet, and skip town...

Agree with jq26 above, you don't clearly state your intentions other than the "Time to strike!!!"

Over that last few years it was very likely you can get a property at a bargain. There is a reason why your price is lower, it could be the neighborhood value impacted the home's value. This could be an indication of who is to be renting and how much they pay.

I think you need to rethink your strategy if the "Time To Strike" is for financial gain.

[strive4credit]

I don't want to be a slumlord or anything. I just want to get something now that property values are low. Whether they go up or not to me is cool. Rentals always bring in money.

I just want to try to avoid a huge down payment, maybe I can establish a business, profit or non-profit and purchase the property under the name of the business.

[jq26]

I couldn't agree more. I'm seeing capitalization rates in the mid teens in some markets. Rents in many markest have been steady, particularly on the more affordable end of the spectrum, and asset values have dropped. In my opinion, rents are about to see serious increases over the next five years. In my own rental, my gross rental income is $2000/month on a 15yr mortgage with an interest expense of $560/month. I'm breakeven to slightly positive annually on a cashflow basis but on a tax basis, I'm still booking slight losses due to depreciation and mileage plus the additional "write-offs" that are achievable through annual schedule E. My losses are fully suspended at this point, so I unfortunately don't net any tax benefits (ie income sheltering) anymore, but those losses remain suspended and will offset future rental income once my schedule E turns positive (possibly in 2011) or if I opt to sell it. Bottom line, NO TIME BETTER TO BUY RENTALS. This is not property speculation because this is a cash generating asset.

The question is who is going to fund it. Banks are being prudent again, as they should be. So you have to beg private parties for it, team up and form a partnership with someone with deep pockets, or you need to save a down payment.

You also can't rent your place out and buy another without 30% down payment in your current home. Buy and bail rules are in effect to prevent just that scenario. I tried it in 2009 so I could add one more rental and not one lender would fund my new loan without 30% equity in the original property. It makes sense really, because it is excessive leverage that can unravel in a hurry and crush an investor, regardless of intentions.

I'd love to get another rental too, but I just can't swing it yet. I have 25% equity in my principal residence and 30% in my rental. And more importantly, I alone (ie not my wife) have to have sufficient income to justify my two current mortgages AND any third mortgage I apply for, which is very hard to qualify for even when adding in potential rental income.

Good luck. Try small banks. They have portfolio money that they may lend out with less restrictions. And since they don't sell the mortgage into the secondary mortgage market, they don't tag you with the endless requirements that are in the LLPA matrix.