Good evening Po.
In addition to working with Zip Realty, I own and manage a number of residential income properties in the Los Angeles area and think I may be able to offer some insight and assistance.
When buying an income property there are a few different groupings to consider when thinking about financing the purchase.
In general, a property that is 1-4 units in total will be considered very much like a loan on a primary residence and your income, credit ratings, debt to income levels and the rental income in the units that will most likely be rented are considered by the loan underwriters (the people at the bank checking to make sure it's a good investment for them). The main issue I see you facing with this type of property is that your income level is so low, you don't appear (on paper) to be able to cover the mortgage obligations along with the other operating expenses you'll face like general repairs, vacancy costs, property taxes and insurance. Do you have any other income from pension plans, retirement accounts or your annuities that you can use as evidence of ability to pay?
The path you may find more understandable given you have a large downpayment is to focus on properties that are 5 units and larger. This market is VERY different and is looked at by lenders as a simple math equation. Does the income on the property service the debt payments, operating expenses and cover their backs should a major real estate downturn occur. With you holding a large cash downpayment, you are actually the ideal borrower for this type of property because your cash allows you to reduce the debt costs to the point where the lenders will feel comfortable with the ratios.
Your best bet is to consult with a local mortgage broker and ask them specifically if they can help you with "commercial loans". Not all brokers are versed in this segment of the industry and if you can't find anyone you know, call a local property management company and ask them for a referral. In my business, I am always happy to refer leads to my lenders because me helping them, helps me in the long run. Before you meet with the lender, go over your finances and take a gut check. Do you really want to be a landlord? If the answer is yes, keep going.
Your next step is to see what 5-8 unit properties are selling for in the areas you are shipping and determining what the market rents, overall rental demand and basic metrics like Gross Rent Multiplier (GRM - price divided by yearly rental income) and cap rate (net operating income divided by price) to be able to shop like a business investor. Your goal is to find the best maintained property with the highest CURRENT rents in your price range. Remember that this is a long term investment and buying the least expensive property may mean you are buying one with deferred maintenance and perhaps problem tenants.
Almost all commercial loans will be adjustable loans. Accept this and realize that you will almost always refinance your apartment loan within 10 years as the rents increase and you can cash out money in a refinance (in some cases tax free or deferred).
Do your research on areas, make sure you are aware of the risks and challenges, and jump on in. Being a landlord can be a rewarding part time job.
