A beginner who needs advice. - Posted by Carlos

Posted by Bud Branstetter on March 01, 2000 at 21:49:48:

You probably need a FICO near 700 and low ratios 28% or less. Owner occupied only and about 1/2 percent more than the normal loan.

A beginner who needs advice. - Posted by Carlos

Posted by Carlos on March 01, 2000 at 10:52:49:

Hi there everyone! I just did a search on AltaVista for “Real Estate Investing.” Here I am. I’ve read a few of the messages and decided to post this message. I am not sure how open you experienced folks are to newcomers and wanna-be investors, but I’ve decided to boldly post this first message and see if I get some helpful responses.

Here is my situation. I bought my house two years ago (I’m living in it). I am considering saving money for a (5%) down payment to buy a second house in the future and rent my current home. I have my regular 401(K) investments, but I feel that real estate is a good way to diversify. My plan is to buy the second house when my current house can generate a positive cash flow by renting it out in the future. In other words, my current house, which is my primary residence, will become an income property for me when I move out.

I’ll move out and rent a cheaper place to save more money so I can come up with the 5% down payment. Is 5% enough for the down payment for a house that will be my primary residence?. I bought my current house with a 5% down payment. I spent $10K between down payment and closing costs.

My plan is to apply for a regular mortgage. A 15-year loan would be good, I think. Primary-residence loans have lower rates, right?

I’m hoping a 5% down payment will be enough with my good credit and no debt (except for my current mortgage which will generate a positive cash flow when I rent it out in a couple of years).
Does this make sense? Then I could live in the second house until I can rent it for more than the mortgage payments and do this again. Has anyone done this before? What are your thoughts?

What are some good books on real estate investing?

I appreciate any comments.


Check your loan - Posted by ken in SC

Posted by ken in SC on March 01, 2000 at 16:24:59:

One question for you is how good your loan is on your current residence. I find that as I buy more and more rental houses, the loans are more difficult to get, especially those with interest rates and terms like an owner occupied house. Thus, I have deliberately bought several houses that I moved into for a year and then moved on, just to get the attractive loan. I have some 30 yr, 6.75 interest loans that I got that way. Especially for a beginner, this is an easy way to build some net worth and have cash flow due to the good loan terms. If you are creative on the purchase of the next home, you at the very least can get the seller to pay most of your closing costs.

Good luck.

Re: A beginner who needs advice. - Posted by Steve-Atl

Posted by Steve-Atl on March 01, 2000 at 15:09:25:


Here’s something to consider. The current tax laws allow you to take up to $250k profit ($500k if you are married) TAX FREE, if you lived in the house for two of the last five years.

I don’t know how much gain you currently have, but if you have significant gain you will be better off selling your house and finding another property for your investment portfolio.

This tax advantage can be huge and you do not want to overlook it. Consult with a CPA to see if that is for you.

GOOD for you! - Posted by SusanL.–FL

Posted by SusanL.–FL on March 01, 2000 at 13:04:11:

You’ve come to the best site there is to learn about real estate…bar none…

Here, you’ll learn a variety ways to purchase r.e. using little or no money out of your own pocket.

You’ll also discover ‘alternative’ ways to invest in property—besides buying/holding/renting.

Read the articles and ask lots 'o questions! Good luck.


Right place, new approach - Posted by Bud Branstetter

Posted by Bud Branstetter on March 01, 2000 at 11:28:55:

Well Carlos, you have hit the right site. We just need to correct your approach. Jacob’s suggestion was to get a 100% loan. My suggestion is to get 100% owner financing, cash back and equity besides. The title of this site is CREATIVE real estate. The articles here and the approach from different angles is how to make money without risk and maximizing profits.

Many people can and do make money by saving up for a down payment, getting a loan, a buying for the long term. Nothing wrong with that approach. There are just people here that do not use their own money, buy and sell several properties a month, and make good money doing it. Learning how to buy is all important. It is more than just asking how low will you go. It is more about how to solve their problem that will allow you to make money with minimal risk.

Let’s analyse your plan for getting new loans on your new house and renting out the old one. If you are fortunate and your old house has appreciated you may have 10K or more in equity. Sell through a realtor and a good chunk of that is gone. Learn how to sell it yourself and you can walk away with the profit tax free. Rent it out and you may have a positive cash flow. That is if they pay on time, you have no vacancies and they don’t trash the place when you have to evict. IF you took out a 15 year note the payments would be about 15% higher. Now it is harder to get a positive cash flow even after taxes. There are houses to to buy as rental at the right time and place. There are also houses to buy to make more immediate profit. There is a way to learn how to be a landlord- the school of hard knocks or the experiences of others.

Stick around and learn.

Re: A beginner who needs advice. - Posted by Jacob

Posted by Jacob on March 01, 2000 at 10:59:25:

Hi Carlos,

In between buying and selling mobile homes, I am also a mortgage originator. Reading your post, you have a pretty good plan in mind. Allow me to state a few things.
If your credit is that good, you could get a loan for 100% of the purchase price on your next home. The interest rate is higher, but you have less money to come up with. Keep in mind, however that your current mortgage will be a liability. Try to have a signed lease with the new occupant before applying for the mortgage on your next home. That way, you can show income from the first home as well.

Re: Check your loan - Posted by Carlos

Posted by Carlos on March 01, 2000 at 16:36:13:


My plan is to move out of my primary residence so I can get another primary residence like you suggest. This way, I’ll get into more attractive interest rates and low to nothing down payments. I think we are on the same page.

Actually… - Posted by Jacob

Posted by Jacob on March 01, 2000 at 12:10:24:

My “suggestion” wasn’t to get a 100% loan neccessarily. I simply wanted to mention that the option was there, since I was under the impression I had was that he was unaware of the possibility at all.

It is difficult to be creative if one is not aware of all options.

Re: A beginner who needs advice. - Posted by Carlos

Posted by Carlos on March 01, 2000 at 13:22:32:

>>>If your credit is that good, you could get a loan for 100% of the purchase price on your next home.<<<

Even though I will already carry a mortgage from my current house?

I am glad I’ve found this site!!



Re: A beginner who needs advice. - Posted by Ed Copp (OH)

Posted by Ed Copp (OH) on March 01, 2000 at 13:21:33:

Let us know what state that you are investing in…ED

Re: Actually… - Posted by Carlos

Posted by Carlos on March 01, 2000 at 13:19:37:

How do you get a loan for 100%? Higher interest rate?