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Step 1
If you are trying to build your rental portfolio, you can use your current home or rental property to help finance the next home purchase. You can refinance to take equity our of a current property or to lower interest rates to get a better return on the current property.
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Step 2
After you have lived in your current home for at least one year, put it up for rent. Obtain a lease or intent to lease for a year on that home at an amount that will cover your monthly mortgage plus tax and interest. With that you should be able to get 80% to 100% financing on your next purchase. Make sure it is a 15 year loan with the lowest down payment.
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Step 3
Your older home must have a lease or valid application with security deposit. The application should be dependent on your ability to close on your new home. This application form is often best built by a fair housing attorney. You may be able to use available boiler plate for this application. Make sure to add the contingency clause.
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Step 4
Your new home becomes your residence. You must live in it for one year before moving out. Once you build some equity, you can start buying property that will be bought for rental and not for your next residence. With a rental property purchase most of the time you will be required to put 20% to 30% down.
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Step 5
Remember that financing has tightened up and you may have to shop around to find a mortgage lender who will work with you on your new purchase. Sometimes even if you have a positive cash flow, a lender will consider a rental property a debt in some situations.
