Rental Financing - Posted by omega

Posted by Omega A. Jefferson on January 25, 2002 at 09:02:51:

I have been searching in towns close to me so far. This particular property is about 30 mins away but my brother is 5 mins away and the handy man I have hired to manage the property is also minutes away from the property. I am also closing on a property close to me and have to say I feel more comfortable being able to drive pass the property on the way to pick up my son from school. So, I really don’t intend on having rental properties far from my home unless I get enough cashflow to pay a local property management company and still make my profit.

Rental Financing - Posted by omega

Posted by omega on January 12, 2002 at 19:14:56:

We have an offer on the table of $52000 for a 2 unit apartment building. Unit one has 1 bedroom 1 bathroom currently renting for $500. Unit 2 has 3 bedrooms 1 bathroom currently renting for $575. We estimate putting no more than $3000 of repairs in this building but really don’t even need to do that as it is already occupied. We have access to a line of credit up to $125,000. Median rents in this area are $600 to $700 per unit. So we expect to be able to increase the rent to meet the market within 2 months as the current renters will be leaving. We plan to hold on to this rental as it is in an up and coming area. We are considering paying all cash and refinance immediately after. Best case scenario is to get a home equity loan at 90% of the sales price which would give us a 21% return. We had a bank that said they would give us exactly that at 7.75% over 30 years, but now that we are at the table it seems things have changed. We would be doing this deal under our incorporated name and this is our first deal. Our question is what is the best financing options we have in order to bestleverage our line of credit and/or do you know of any lenders that would give us our best case scenario?

Re: Rental Financing - Posted by michael ellenby

Posted by michael ellenby on January 16, 2002 at 11:05:27:

Sounds like a great deal - how do you find out about such a well-priced duplex? I am new to this and I am having a challenge in finding such condos / duplexes.

By the way, how did you end up financing this?

Re: Rental Financing - Posted by DanT

Posted by DanT on January 13, 2002 at 06:22:13:

This is how I buy my properties. I buy with a credit line. Do the needed repairs and get the property “settled” (tenants in place, repairs etc.) then go to a mortage broker and borrow against the house to pay off the line of credit and do it again. The only issues are LTV must be adequate to cover the credit line amount, this combined with the lender giving an adequate percentage to meet you needs. Mine are generally rehabs and I am comfortably at 70% or less LTV. The nice thing about this system is it is like dealing with cash and there are no seasoning issues. DanT

Re: Rental Financing - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on January 12, 2002 at 22:24:01:


Congratulations, that sounds like a fine cash flow cow.

In general, it is not good to use a line of credit to finance a long-term hold property. However, if there is some hitch in getting the long-term financing, it makes sense to use it for a short time until you can refinance with a standard long-term loan.

Best would be simply to close with a standard long-term loan. If you can only get 80% financing, well that is pretty standard. Could you get a FHA-insured loan for this property? Could you delay the close until you line up a good new loan?

Good Investing****************Ron Starr**************

Re: Rental Financing - Posted by Omega

Posted by Omega on January 21, 2002 at 07:41:47:

We searched for quite some time on the internet and in newpapers. We also let our relatives and friendsin that area know we were looking for some good rental properties. We also contacted many of the real estate agents in the target area and let them know what we were looking for and were very specific. This particular property we found on the internet. Keep looking and be patient. We are going to mortgage this property @ 75% of the value. We have other properties that are under contract and would really like to begin flipping some properties so we didn’t want to tie up our line of credit too much.

Re: Rental Financing - Posted by Earl

Posted by Earl on January 24, 2002 at 19:30:03:

I agree, it sounds like a great deal! I’m interested in that you found it on the Internet. Is the property close to you? Were you able to find one like this close to your home or did you have to branch out a distance? By using the Internet are you accepting rentals a good distance from your home, and if so, how do you plan to manage it?
Good luck!