Found Cheap Duplexes Now I Can't Get Financing
I am just getting into REI. I found a couple of duplexes. The tax appraisal is about 40k each. I have a purchase agreement to buy them for 18k each. They are occupied and each brings in $700 / month. I already put down 2k on each but I need financing to finish the deal. A conventional loan will cost me another 2k each for various closing costs plus they want an additional $1600 each for a down payment (80% of 18k).
Does anyone know of lenders that would do such a low capital purchase loan and a lender that would do a small to 0 down loan.
At a 40% LTV I thought I would be able to get a zero down loan without a problem.
Any help or ideas would be appriecated.
Thanks!
Here's the jist of it:
primary residence : 100% financing is available.
second residence : 90% financing is available.
investment property: 80% financing is available.
You could get 100% financing on only *one* of these properties (you can't live in both as primary residences) IF YOU lived there.
If not, they are investment properties and you shouldn't expect *anybody* to loan you 100% on them.
So, here's how it would probably work:
on each duplex you would have to come in with 3600 *plus* hard costs (closing costs). Unless you have an agreement with the seller for seller credit, you *will* incur out of pocket expenses there as well. Lets assume that Hard Costs are $3500 per property (reasonable).
7200 + 7000 = $14,200 out of pocket.
These 18k properties are pretty expensive to buy now, aren't they..
Because of the very small loan amount on these properties, you also can't benefit from any borrower crediting you closing costs - Even a section 32 waiver with 2-3 points credit would only give you at MOST $400 bucks per property.
The nice thing about these is that @ 700 per property coming in per month, you would make back your initial outlay of 14,000 in 12 months.
Hell.. the mortgage payment on each property would only be 100 bucks a month.
If you can come up with 14,000 - DO IT. If you can't, hang back and save up some money.
Too many times people think that they can buy investment properties with no money down, no money out of pocket. Well.. you show me the investor and i'll be happy to package your loan for you.
The closest thing would be TMO (the mortgage outlet) but even then, they probably wouldnt' touch these duplexes. There's gotta be a ton of deferred maintanence on these and I would sincerely doubt that they will appraise for 40k a piece. Tax assessment is *quite* different from actual market value.
Regards.
Loans that small will require using a local bank.
I am no expert but I might make a suggestion. If the deas are that good: 40% LTV why not borrow the whole amount from a hard money lender then refi in a few months. I am fairly certain that intest and points paid are tax deductible though not positive.
Just a thought
Bri
Thanks for your comments and thoughts. How do I go about finding a hard money lender?