Advice on investment property downpayment
I have 40k in cash another 20k invested in funds, 15k in 401k that is it. I am planning to buy rental property of $300k out of state. TC ~180, young, not married. Min downpayment offered so far is 15%. I dont want to cash out from my investment and 401k also would like to keep 10k at least from my cash. I am not gonna get more than 7k loan from 401k. is there any lender who can give me 10% or less downpayment with/without PMI on an investment property? #housing #investment #mortgage #property #rental Edit: - I have never meant I am going to take the money out from 401k, infact I don’t even want to take the money out from my other investmenta in ETFs etc. However I am consudering taking loan from 401k @6% which I get 7K max - I am on visa, I will have a property manager. - I am considering new constructions only, its a long term plan - I currently do not own a house - All I am asking is, do you know anyone who can lend me with less downpayment on insvestment property?
Im new to this, what does TC mean? total comp?
Yup
Dude, be patient. I’m in a very very similar boat as you and you won’t find a loan without pmi if you aren’t putting down 20%. Also if you’re not putting down at least 20%, it’ll make it too close to not being cash flow positive when you consider all factors. Also go take a finance class or something, never ever cash out your 401k early unless it’s an emergency. Also with that tc, you should start maxing that out every year.
I max out 401k every year, forget withdrawing 401k I don’t even want to take out other investments I made in index funds etc I will pay whatever remaining 20% within 6 months and get out of PMI and I am not really considering +ve cash flow when I don’t put 20% down.
Im always looking into investment property
have you checked biggerpockets.com, is has alot of resources such as hard money lenders etc
This, Let me check
watch the youtube videos and search brrrr method on their youtube channel.... thank me later
never take anything from 401k
I do not plan to take 401k at all, at max I will take loan on 401k which you get for 6% interest.
Take a loan on 401k is “take 401k”. And that’s stupid, don’t do it.
have you looked into the brrrr method? buy, rehab, rent, refinance and repeat?
OP, it sounds like you have some research to do around all of this. Jacobs comment about brrrr is great, but you also need to understand the risks. That largely banks on having a decent increase on appraisal once it is renovated so you can refinance and get some money out. If something changes or it doesn’t increase you need to have planned for that scenario.
Well I plan to buy new construction, this is not really kind of side real estate buy/sell income I’m considering. Its a long term plan, I am on visa so I just want to give everything to property management. Fyi: Made some edits to OP
Taking from 401k isn’t always a bad thing. Most 401k allow you to take a loan against it for a home purchase, with zero penalty. They simply have you repay it monthly back into your 401k with interest that goes to yourself as well.
You’re correct, but with your current situation you’ll be buying at peak market and really stretching yourself when you can wait another year and be in a much better position.
@sweetbruh very true, timing is everything. Housing and stocks are both at peaks right now. The point is that people are quick to say you should never borrow from a 401k when in reality, using it to buy real estate could do better depending on the market. Example: $50k in a 401k averaging 10% per year will grow to $80k in 5 years ($30k profit). If you use the $50k to buy a $250k home, the home will be worth $320k at only 5% per year in 5 years. That’s $70k profit.
Do you own a home now? If so try HELOC or do cash out refinance of your primary home. Putting less than 20% on an investment property itself will make it very tough to find lenders. Even if you find one, you can't get away from PMI. Suggest to get a property around 150k and get your feet wet. Build a proper team b4 venturing out of state. Its not going to be easy doing OOS Investing
Updated the post with few edits
Your TC is quite good..why not wait a bit and save more? Opportunities dont end and it looks like rates will be low for a while
I agree. I'm willing to bet that in the incoming timeline the properties may even be cheaper!!
@nT I hope your prediction works out for you, but nothing can be guessed right in market @asi I will end up spending more, with this i will have a commitment