Rental Property #5 Update (December 28, 2013)

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Here’s a quick update on the status of Rental Property #5. I officially started the closing process with the lender yesterday, after they pre-qualified me to purchase another rental property. Woohoo! Even better, this lender won’t be scrutinizing my debt-to-income ratio (like what happened during the last purchase with Rental Property #4), so I won’t be needing a co-signer this next time around. SO AWESOME! 

I didn’t lock the interest rate, however, since they were quoting me 4.99% at 30 year fixed mortgage. That seemed kind of high to me, so I decided to hold off until this upcoming Monday. I also didn’t want the 40 day window to start ticking yet (after 40 days you have to pay a lock-extension if rates increase), as I’m still trying to stretch out closing for as long as possible (to help me build up more funds). The lender is targeting January 24, 2014 as the day of closing.

I’ve gone ahead and ordered an inspection, which should take place sometime in the next two weeks. Same for the appraisal. The only real catch with this property is that the lender is requiring me to come up with 30% downpayment for this purchase (not the standard 25% for investment properties). The reason? This will be my fifth rental property, and the underwriting guidelines change when you get to #5! Lenders have to be more cautious, so they require more downpayment and more capital reserves for the other rentals (6 months PITI on EACH rental!).

With a purchase price of $180,000, I will need to bring $54,000 in downpayment funds to the closing table. Further, to get through underwriting, I’ll need to factor in an additional $6,000 for closing costs, and probably a little extra to show some “margin”. So, I basically have one month’s time to hoard as much cash as possible… I’m about $12,000 short… Let the fun begin! 😉

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JeremyBrick By Brick Investing | MarvinCharles@gettingarichlifeThe First Million is the HardestCI Recent comment authors
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JC @ Passive-Income-Pursuit
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Man, looks like January is going to be a busy month! Just curious, since they’re requiring 6 months PITI for each rental, which seems a little outrageous to me, will 401k money count towards that coverage or not? Interesting to see a 4.99% interest rate. I was basing my calcs off of a 5% but was hoping to see something closer to a 4.5-4.75%. How bad have rates increased due to the taper being “reduced”?

Fast Weekly
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It’s looking good FI. Congratulations on having another hurtle down. I was wondering if you were making any adjustments to your 401k or Roth as a result of the stock markets run up and your increased real estate leverage. Taking some portion of your stock exposure and putting it in high yield savings or a money market account might help keep your ship balanced.

It’s incredible how much rates have run up in the past 8 months. I expect a 30 year fixed loan to climb at least another 25 bps. The 10 year yield may bounce down off of 3% in the short term, but I think you’re spot on that rates are moving higher……with or without the Fed. I hope you can shuffle the money around and lock in another winner. We’re all pulling for you FI!
-Bryan

Trader
Guest

Hello
I read you from Portugal and really enjoy to know about your achievements.

Impressive!

have a nice 2014!

Elroy
Guest

I am curious [….] genuinely [….] if you outsource what is the true cost and if you don’t how much time do you spend with your rentals? And if you do outsource, it still takes time [….] ? It would be a good blog post for me to see [if you’re taking requests].

Martin
Guest

You have never stopped me amazing man! Where the heck you get all the cash so quickly? Do you have a press machine in your basement? Are you affiliated with FED or Ben and he shoots you a few bucks here and there? I struggle to cut the corners and get 300 bucks and you just a few months later after closing #4 say :I need to come up with 54k and maybe some safety margin of another 12k…” heck on which tree do you grow the green bucks? I will sneak out at night to reap a few 🙂
Well, hope you have best of luck and close successfully and get closer to your dream. I think I have to stay on your side as a friend when you become a rich landlord!! 🙂 I will be your bag holder or door opener or something 🙂

CI
Guest

Awesome! Have you considered dipping into your 401k for cash? Or do you need it to keep your asset pool high?

The First Million is the Hardest
Guest

Coming down to the wire! Hope you come up with the $12k in time!

Charles@gettingarichlife
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Would you consider doing a 401K loan if you’re short. You will need a sale contract but will be able to get a five year loan at a really low interest rate. Here’s to another great year in 2014.

Brick By Brick Investing | Marvin
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You my friend are a machine!

Jeremy
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Thanks for all the great info and I am loving your blog!

FYI I just contacted Prospect Mortgage yesterday for my 5th property and they said I could do 25% down – however, that is with a single family so a 2+ unit might be 30%? They seem to be one of the leading lenders that do mortgages for investors who own 4+ properties other than local portfolio banks who will only give me a 5 year term.

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