In an earlier post My Big Break I wrote on how I have now purchased three rental properties.  I apologize for the delay, but I wanted to present this info to the folks at the Beer and Pancake meetup before posting on here.  I know, I know who cares if five people know before hand.  Meh, call me strange.

Any who, its a fairly simple processes.  I got in contact with a rehabber in my area.  He is able to purchase properties for as low as 40 cents on the dollar.  He then fixes up the property, puts a tenant and home warranty in place.  After that is all done he turns around and sells the properties to investors for 80% full market value.

Why 80% ?  Its fairly simple.  That is highest amount that Fannie Mae will refinance a property for.   (Now 75%).  He was able to get a direct lender that is willing to immediate refinances.  He will sell the property to you at 80% FMV.  You purchase via a hard money loan.  After you purchase you perform a refinance on the property and pay off the hard money loan.  My only out of pocket is closing costs.

This is great way for a first time property buyer to get into some rentals.  I have learned a bunch during the process.  I now have the confidence to move forward on my own fix and flips.  I’ll be doing that shortly.  I just need to put my plan together,

Downsides to this setup can be many.  The biggest downside so far has been Fannie Mae.   This atrociously run government program has been changing its mind on properties for investors on a whim.  One day they will be at 80% refi, the next at 75%.  No warning.  This has absolutely devastated some families trying to use that money to help themselves out.  I can’t even imagine the reasoning behind it.  Bureaucrats. Sorry bit of a rant.  That rule change costs me an extra 5% down on one of my properties.  I’m just glad I had the reserves.

In my next post I’ll detail a bit more on my properties.  Now Ive been a landlord for 2 months.  All is going well so far and again I am learning a bunch.  Till then.