Getting the right Investor loan

9 Replies

Hey BP community I’m a new investor looking to buy my first investment property and rent it out to tenants. I have been looking into what type of loan would be best to finance a investment property but also benefits the investor. If you could give me any tips or guidance on this topic I would really appreciate it. Thanks!

@Brandon Lewis You'll likely get a different response from everyone you ask. It also sounds like you ought to sit down and talk to a lender. If you already have a property in mind, you ought to know what it generates and get a loan with an interest rate that is low enough such that your property will properly cash flow. I'd sit down with a lender, ask how much they could lend based on you as a borrower and what the monthly payment would be and look at the potential rental income in your prospective purchases.

Hey @Kristina Heimstaedt thanks for that feedback I really appreciate it. Im definitely going to speak with a lender to see what I can borrow for a mortgage and compare that to the rental income as well as all other expenses, and see if it makes a good positive cash flow for me. I have been seeing that most likely lenders will ask for 20-25% down payment if you already own a home and are trying to purchase an investment property, is that something that usually happens?

@Brandon Lewis it’ll vary between you as a borrower, your state that you borrow in, deals that they’re offering, etc. By in large, it is my understanding, that locally in California the minimum requirement is 30% for traditional financing in income property. 

Things to also consider are comparing a 30 year fixed versus a 7/1 arm, etc. that’s really where you’ll see the impact of rates. 

@Brandon Lewis You can purchase one unit with 15% down payment and 2-4 units with 25% down payment for investment property under conventional loan. Your lender can give you figures according to your loan scenario so you know which product is good for you. 

Thanks for this information @Kristina Heimstaedt . It really helps me have an idea of what financing options I can explore when I speak to the lender and what I can expect to pay for the property. Low down payments would be nice but I know the more $$ down the lower the interest rate, which maybe be in my best interest for the long run. 

Thank you for this info @Harjeet Bhatti . I was expecting a higher down payment with a conventional loan for a single family property, but if these numbers are similar to where I am then a conventional loan maybe the option to go with 

When we started buying more investment property, we looked at all financing scenarios as the financing is a very large part of the investment. For us, with interest rates as low as they were (and still are, mostly), we settled on conventional 30-year fixed, so we gave up trying to get LLC financing -- more expensive, higher rates, shorter terms -- and just went with landlord insurance and an umbrella. At that time (2008-2010), it was 20% down on 1-4, 25% down on 5-10. It was difficult finding lenders who do #5-10. It's a little easier now, but still a challenge. Our first home, back in late '80s, was at 11 3/4% interest, so we appreciate this low-interest-rate environment. It's been around for much longer than we assumed it would be, and we've basically maxed out our debt at these low rates at the 30-year term level. We're happy to pay these interest rates for 30 years, so no rush to pay them off.

@Lynn M. Thank you for your feedback. I'm definitely going to speak to some lenders and see what the financing terms are for a conventional loan,  I'm seeing that the average % down for a single family seems to be between 15-25%, so what I’m expecting the lender will tell me.

Almost all lenders I’ve talked to will be 20 percent down minimum. I believe I’ve found some lenders that do 20 percent down on mortgages 5-10 but your interest rate will likely be higher

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Join the Largest Real Estate Investing Community

Basic membership is free, forever.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.