You are absolutely correct, as are my colleagues, in regards to financing this property. The ideal situation is to leverage your current cash and utilize a 203K rehab loan. This will include the purchase price of the property, as well as, any repairs that need to be completed for the property to be in move in condition. The nice part about the 203K program is that you can also include appliances, making the property more marketable for prospective tenants. If you have further questions, please feel free to contact me, we specialize in 203K Financing.
Your Home Loan Partners
Pan American Mortgage, LLC
877-588-6956 Toll Free
There are a couple programs out there for investment properties. They require great credit and at least 25% down.
If you're considering 203K, we are hosting a free workshop on the 203K program this Saturday, March 13th, from 9AM-1PM. A Lender that specializes in 203K loans will go through a couple case studies and explain the process and cost structure. It is free, but space is limited, so contact me to RSVP if you plan to attend.
Best of Luck
Keller Williams CCG
3 and 4-unit properties, according to FHA rules, must be self-sustaining. This means that the net rental income must be equal to or greater than the projected monthly mortgage payment. The good news is that for the self-sufficiency test, net rental income is defined as the "appraiser's estimate" of fair market rent from ALL units (including the one you plan to occupy) minus the appropriate vacancy and maintenance cost factors. For Illinois, this is 85%, so as long as your project mortgage payment is less than 85% of the appraiser's estimate of total rental income, you pass the self-sufficiency test.
For qualifying purposes, projected rents for the rental units only are considered part of your gross income (again after factoring in the vacancy and maintenance cost factors.) You must also have 3 months of verified PITI reserves.
Please call me for more information and to get pre-approved. At Ardain we have roughly 15 years of experience with the FHA 203k loan. You can also get more information by going to our CEO's blog at http://www.richardhartian.com
My information is below.
Senior Loan Originator