Financing - rates for investment properties

5 Replies

Sorry - I'm new here and just getting started so don't know my way around. I'm sure this question has been asked a million time so maybe point me somewhere else if its been answered. I've done some searching and have seen pros and cons to gettinging financing for an income property under your own name vs an LLC. One of the disadvantages to getting it under an LLC is that it said you would have less favorable commercial lending rates. Wouldn't you have be sunjct to commercial lending rates regardless since the property is an income property?

Originally posted by @Tom Hertz:

 Wouldn't you have be sunjct to commercial lending rates regardless since the property is an income property?

No, Fannie Mae and Freddie Mac both do 30YF residential loans for 1-4 unit investment properties. Commercial loans are very very rarely 30 year fixed. The only reason I say "very very rarely" instead of "never" is b/c Warren Buffett can prob get a 30yf on anything he wants. 

Originally posted by @Tom Hertz:

 You can actually loans finance Investor rental property one of 3 Major ways:

1-Fannie Mae/Freddie Mac Conventional Lending, the most restrictive of all funding
2-Non-QM Lending (Non Qualified Mortgage) Residential lending 1-4 units (the most lenient type of funding) with only slightly higher rates
3- Non-QM lending Commercial Lending, 5+ Units ( YES you can get 30 year fixed mortgage)

Depending on your goals your choice could be any of the 3.  I'll PM to give you more insight.

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Originally posted by @Chris Mason:
Originally posted by @Tom Hertz:

 Wouldn't you have be sunjct to commercial lending rates regardless since the property is an income property?

No, Fannie Mae and Freddie Mac both do 30YF residential loans for 1-4 unit investment properties. Commercial loans are very very rarely 30 year fixed. The only reason I say "very very rarely" instead of "never" is b/c Warren Buffett can prob get a 30yf on anything he wants. 

You can indeed get a commercial residential, 5+ units loan for 30 year term.  Those loan products do exist.

Ok - so maybe my terminology isn't right.  When I just went through one of those rate request things online, when I select primary residence vs income property, the rates for the income property option are about 1.5% higher.   I guess I was thinking that was because it was a commercial loan.  So back on the LLC question now, will getting the loan under an LLC name impact the rate or anything else regarding financing over not using the LLC?

@Tom Hertz

It's really the age old question on BP with multiple threads that address the issue with attorney opinios etc..., but here's what we always tell new investors. Always exhaust your conventional financing options first because they are markedly cheaper. Once you can't get conventional financing for one of myriad reasons why people can't get conventional financing, start using portfolio lenders that will more than likely require an LLC. Until then, put them in your personal name and get a substantial umbrella liability polity that will cover your risk.

Best of luck

Stephanie