Financing second property, how to qualify - Posted by Greg Harris

Posted by dell-ohio on July 11, 2003 at 21:58:03:

I thought about the credit card when I wrote my response, then forgot to mention it.

The reason I did not include the credit card as available down payment money was for that exact point.

Keep the credit card for emergencies , repairs, small improvements that will be necessary.


Financing second property, how to qualify - Posted by Greg Harris

Posted by Greg Harris on July 11, 2003 at 18:49:38:

I am a 23 year old male living in Phoenix, Arizona. I make apprx. $20000 a year. I just bought my first home and it appraised on the close date at $13000 over what I paid for it. I put $6500 down. I have 19500 equity from day one. I have $6000 credit card line. I have a 716 credit score, I was approved for 130000. My home cost me 129000.
I want to purchase 2 four plexes in the next year to year and a half. How do I get qualified on my salary?
I want to keep moving and finding deals, but what is the next step. Any information would be appreciated. Thank you in advance, Greg Harris

Re: Financing second property, how to qualify - Posted by Randy

Posted by Randy on July 12, 2003 at 15:27:12:

There are a lot of way?s to qualify. Your salary is not as much an issue as your cash reserves (typically 3 mos reserves) and the cash flow of the subject property. With your credit score you can get 85% to 95% financing, some of these are Stated Income No Documentation loans. Find a flexible seller willing to carry a small 2nd or purchase slightly below appraised me if you want more info.

Re: Financing second property, how to qualify - Posted by dell-ohio

Posted by dell-ohio on July 11, 2003 at 21:51:20:

Good Day,

Some options.

  1. Ask the seller to finance the entire project
  2. Borrow what you can from the bank and ask the seller to carry the down payment. Usually 80/20.
  3. Borrow 80% from bank, seller carry 10%, you put 10% off your money in the project.
  4. Purchase Subject 2

I would look for a local community bank that loans on commercial properties. In our area the banks will loan 80% of purchase price or appraised value, whichever is LESS.

You could interview a few banks/loan officers and explain to them what you want to do. Ask them if they make these kinds of loans and what their requirements would be. Ask them if they take equity in other property as a down payment, do they accept the owner carrying the down payment.

Some banks will take equity in other properties for the down payment. (this is how we buy all our properties if the owner does not carry the down).

Some banks will allow the entire down payment to be carried by the seller. Some banks require the purchaser to use 10% of his own money and allow the seller to carry the other 10% down.

If you find a bank that allows owner carry back of down payment you are only limited by your ability to find a seller willing to carry 20%.(shouldnt be too difficult)

If the bank requires you to contribute only 10% and they are willing to use equity in another property you could purchase a 400,000 property. If I understand you correctly.

Your house appraised for 13,000 more than what you paid for it. You put 6,500 down. 13,000+6,500 gives you equity of 19,500 or say 20,000. Say you have 20,000 equity, the owner is allowed to carry 20,000 thus you have 40,000 down, enough to purchase a 200,000 piece of property.

My Viewpoints


Re: Financing second property, how to qualify - Posted by gerald(tx)

Posted by gerald(tx) on July 11, 2003 at 21:31:16:

If I were you, my next purchase would be a SFH purchased via Sub2.

Looking at your info, the first thing that bounced out at me was the stiff house payment you must have with a $20k salary. Jumping into a four-plex, even if you could swing it, might be too lofty as a second purchase. Too many contingencies can arise for your reserves.

Do a Sub2 and keep that credit card line open to handle unforeseens. Grow gradually and progressively in RE, you’re young and have plenty of time to amass a fortune.