New Investor I got a 80/20 ARM Loan on a multifamily property HELP!!?!?

I am 20 years old from washington, I somehow managed to buy a duplex w/$0 down 80/20 Arm loan 80@7.5% 115,000 and 20@11.5 32,000 Yes rates are very high but w/ 0 down and no assets other then my car I had to take what I was given. Now being a landlord at such a young age is good experience I think, anyways, my question is I want to buy more properties. I will be paying interest for the first 2 years and I have no extra money to pay extra on top of my minimum payment. I am losing money rents out both units@$1125 + $115 water +75 add to mortgage payment so I'm losing $190 a month, I know it's stupid but atleast I know now. Did I screw myself? Or is it possible w/ all these high interest rates and expand refi and buy more property in 2 years? Any suggestions? I would deeply appreciate anything from experienced investors. Sounds to me I screwed myself. Both tenants are very nice and on time one is month-to-month and other is on a lease and begging for me to renew it again. Please help Thx!

I understand that I got myself in a hole and that I should refi and pray for lower rates to ATLEAST break even. I mean at first I thought losing $200 wasn't too bad considering the fact I am 20 and someone actually gave some 20 year old kid a $150,000 loan w/ NOTHING down on stated income making below poverty level at a restaurant. I figured out if a tenant moves out worse case I can move in myself instead of paying rent at my current place. Any more suggestions? Perhaps I got myself in a hole too deep and I should just sell in 2 years and get OUT? I hope to get more suggestions and ideas, and worse case scenarios someone who actually knows about this loan stuff. I deeply appreciate it. Thank You!

Work on the refinancing angle. If you let the lendor know you are interested in buying more property (and, thus, potentially giving them more business) they may go for it sooner rather than later. Negotiate hard for much lower rates.

Are you freaking nuts? Don't even consider buying another property until you've got substantial equity behind you (like 10 years). You better hope your tenants stay on and be the best landlord in the universe. If one of them leaves you are screwed buddy. A foreclosure on your property will really damage you.

Negative $190.00 per month in cash flow isn't too bad that your regular job can cover it. I wouldn't get more properties though for two reasons:

1. You are young and still have time, which means no need to take on too much risk at one time.

2. Housing market is likely going through a correction. Buying low is always better. Wait a little bit.

Another suggestion, 7.5% and 11.5% are very high rates. Could you secure some money to downpay to lower your rates? That will probably turn your cash flow positive. Only then, I would get second property.

Only a suggestion.

if you have only $190 neg cash flow from your property, is not that bed. your interest rate is not bad either- 100% financing for investment and you probably got this loan with stated income.
try to save some money before you will look for new property. you are never sure if your tenants will pay on time, but no matter what, you have to pay your mortgage in time.
remember that location, location is the most important thing if you plan of buying other properties and keep them rented out.
to refinance investment property for better interest rate you need to wait for equity to be built.



i quest I'm a investor -owning 4 houses right now

I know in most parts of Los Angeles there is rent control which allows you to increase rent a certain percentage a year. I think you should look into increasing rent ever year if possible. If there is no rent control, you make be in luck. Increasing the rent should offset your short term losses. In two years, I suggest you try to refinance to keep your mortage payments as low as possible.

If interest rates go up, so does your mortgage. There are also other things to consider. Repairs, one stops paying rent for three month then what? You are in no place to buy another one. Don't buy another one.

Be practical, and make some smart decisions. You're young, so take advantage of your youth. Really think about moving in the property you purchased. Try this, send both tennants a letter in September announcing a 10% increase in rent starting January 1. Most likely both tennants will stay, take the increase, and you're no longer losing any money. If one of the tennants moves out, you move into that unit. Live there for the two years of your interest only period. When the loan adjusts, and there is no longer any pre payment penalty, refinance the loan. Your situation will have improved dramatically, with excellent payment history, some equity built up on the property, and hopefully your financial situation improved. Refinancing to a conventional loan, 30 year fixed at that time, will help you take the next step towards purchasing your next investment property. You're not screwed, just do the right thing.

Considering you did an 80/20 stated on an investment property, I would say the rates you have are actually pretty good. If you're concerned about saving money, or even making some money, do not renew the lease with your tenant and move in. Once you are living there, it will be considered your primary residence, which will allow you to qualify for lower interest rates if you refinance. This way, you aren't shelling out money for rent and losing $190 a month. You're still young and have plenty of time ahead of you to build up a real estate porfolio, and this will allow you to actually free up some cash flow every month to invest so you can accumulate a little wealth.

I say you re-fi the current property and go with interest only on the loan, I can take a look at your situation for you if you'd like. I am a mortgage broker and work with over 100 lenders nationwide and have several programs that are constructed to fit an investors agenda very well. Please feel free to drop me a line Jcorreahq@yahoo.com

You said it - you screwed your self.
GET OUT as soon as you can - you are a classic nightmare investor . The ones that are taught about - what not to do! Oh keep you car clean and well running you might need to live there. Go with L.U.C.K.