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Need small mortgage for rental property??

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SantaMar
Regular Contributor

Need small mortgage for rental property??

Wife ad I bought our first home last year. We have been given promotions with work and things are working great. Planning for a child but would like some cash flow through a rental property.

There are some properties in decent areas o our city in the 50k to 75k range. Our plan is to put as little down as possible. I estimate a 30 year fixed mortgage would be around 300 a month and rent is goin for 800 to 1k. Our plan is def not original lol.

In any event, are there any lenders out there who work with small mortgages? Can we go FHA on second homes/rental homes? It would be amazing to get the keys with under 5k out of pocket!!

On a side note, rental income....if the mortgage is 400 and I can get 1k a month for rent, how will we be taxed? I know I can't pocket 600 lol.
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StartingOver10
Moderator Emerita

Re: Need small mortgage for rental property??

No, you can't get an FHA mortgage for investment property.

 

I have seen people do it the other way around; buy a primary property with FHA financing and then after a year or so move up to another primary property with a conventional loan (maybe 5% down) and rent out their FHA financed property. That is OK. But there are no FHA investor loans.

 

Most investor loans require a minimum of 20% down now (used to be 10% but that ended with the 2008 melt down). I am talking about conventional loans with decent interest rates. There are other types of investor loans (hard money/private etc) but those loans generally are used for investors that buy and flip as the rates are high. For a buy and hold you want the lowest rate and carry costs you can get.

 

As to Federal taxes, there are all kinds of things to deduct on a rental. Smiley Happy Plus depreciation. Get a very good accountant/CPA that is familiar with rental properties - its worth it for the tax savings and the peace of mind to have a professional prepare your tax returns when you have investment property IME.

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SantaMar
Regular Contributor

Re: Need small mortgage for rental property??

Ok scratch FHA loans. I can still cover a 10% down on a 50 or 70 k loan. How do they determine whether its an investment property or rental. Why do I have to disclose what my plan is? Maybe I just want a second home close to where I work so I can have a city he and suburb home?? Either way what would my options be?? Should I expect to come with 10% down for a conventional?
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