If you’re a new investor looking to achieve financial independence through real estate, you may be able to achieve your goals more quickly simply by using the right loans in exactly the right order.
The key to achieving this, if you don’t already own a property, is to owner occupy the first two or three duplexes you purchase. By doing so, you can take advantage of low down payment financing that isn’t available to investors who don’t live on the property.
It’s crucial, however, that you use the loans in the right order.
For example, several Twin Cities lenders have first-time buyer financing for up to four units that requires just a 5 percent down payment. In some cases, this loan may also allow buyers to take advantage of municipal down payment assistance, which may result in the buyer having to come up with less of a down payment.
To take advantage of this loan, it MUST be the first one you use.
After you have lived in your first rental property for a year, you are eligible to move out and purchase another. For the second property, you could use an FHA loan, which requires 3.5 percent for a down payment. Or, if you’re a veteran, you could use your VA loan, which would allow you to move in with no down payment.
With rare exception, you are only allowed to have one FHA or VA loan at a time. So when you have amassed enough equity in your duplex either through principal paydown or appreciation, you refinance the mortgage into a conventional loan. This frees up your FHA or VA eligibility once again.
Done right, you could assemble an entire portfolio of rental property using less than 10 percent of your own money. All you have to do is get the right loan first.
For information on where to qualify for the 5 percent first time home buyer loan, feel free to email or give me a call.