Okay–I admit to being the queen of conventional loans–even though I’m none too keen on banks myself. That said, if you have mad high credit, you can get a no income verification loan. But essentially, a bank is looking for proof of income—if you are self-employed–we hope you are generating an income, too. But if you go conventional in terms of mortgages, you have to provide a financial statement (yours or your company’s, 2 years income taxes, last two months bank statements, leases and whatnots for your properties, and various and sundry proof of liquids and assets.
Now, I use conventional financing because my circumstances are no doubt different than many investors on this board. First, I’m part time. Also, I live and work in Connecticut but I do my investing in a very economically depressed area in Virginia. This is in no way a hot real estate market and time usually isn’t of the essence. Moreover, it takes me less time to get a conventional mortgage than to put together a deal down here–because I’m not down here (my mother manages my properties–and…well, that’s another story.) So for my situation, conventional mortgages have been fine and I also have enough credit to pay cash if something really swell comes along. But if you’re already doing subject to flips, etc., and you’re in the area of your investments why would you want to fool with banks except to secure a nice credit line?
Lets say you made a business out of doing subject tos, lease options, flips, etc, etc, without using any of your own money. You started making a lot of money doing this. Now your ready to start buying multi-family units on your own (no joint ventures or hard money) Will banks lend money to you? It seems a lot of you people here are full time investors and can get loans very easy. I don?t understand that. I always thought if you didn?t have a “steady job” (ie. work for somebody else) banks hated you. At what point will banks lend money to you? I?m guessing you will have to incorporate your business then show them 2 years of your business transactions? Explain to me how some self-employed people end up getting loans please.
Posted by Frank Chin on August 18, 2003 at 08:13:42:
Hi M:
You said “You started making a lot of money doing this”. And in your answer to Ron, you mentioned that you want something for appreciation.
I agree that “buy and hold” in fast appreciating areas is the the best way to long term financial independence.
Now, if you indeed made a lot of money, and wish to invest some of the money, then you’re talking about making a down payment. With a 30% down payment, you get the best rates for NO DOC loans, where all they need is your “credit report” and an “appraisal” of the property.
As for “no down” for small apartment complexes, I think those are too management intensive. For the same amount of work, you’re far better doing what you’re doing.
It’s called a financial statement. If you prove that you are credit wothy, have the income and the assets to protect them in the case of default, have shown the ability to make money, they’ll beg you to borrow.
Posted by Brent_IL on August 17, 2003 at 20:16:12:
I do many things that work so well that I stop doing those things and then wonder what happened.
If you made a business out of doing subject-to?s, lease options, flips, etc, etc, without using any of your own money and you started making a lot of money doing these things, why change what works?
Multi-family units with more than four units almost always have some kind of post-sale seller participation. That?s the way they get sold.
I learned not to use banks when they armed the guards with squirt guns filled with Holy Water, and poured salt around the building perimeter when I came, hat-in-hand, to borrow money. After learning how to make deals without them, I didn’t care anymore.
With the sole exception of a working lone of credit, banks can never move as fast as is necessary to complete the most profitable deals.
Well, that makes the assumption that you are going to go after institutional loans. That is not necesssarily so. GL(ON) has talked several times about getting weller carry-back loans for rundown apartment compleses.
Also, many investors, even when they do wnat o hold rentals, go for smaller projects, sich as single family and 2-4 unit residental. The financing for these is similar. Also, it is possible here to use owner finanicng or take over the properties subject to the existing loan.
Some of the people doing subject to investing talk about holding a portion of their purchases as rentals, pretty much from the beginner.
Perhaps those who get loans from banks will also answer your question. I have not done so for four years. And all I did was apply for loans than they gave them to me. It was really quite simple.
The reason I want to invest in multi-family units is to start building wealth. Real Estate to me is three things: [Fast Cash], [Cash Flow] and [Equity]. I want all three.