Recently closed on residential with rate of 3.5%. I know investment properties run higher rates but is 5.75% a bit too high or that’s typical? This will be my first purchase of actual investment property.

Thanks!

For conventional, that's slightly higher than average. If you're referring to a private lending company, that's good. Many investors are getting between 4 - 5% for rental properties when going with banks. When going with PML's, it's anywhere from 5.5% - 7.5%.

@Mo Muigai Yes, @Timothy Hero is correct - I've seen loans, especially for LLCs, as high as 8%. 

If you're buying a primary residence or using your FHA loan then you may be able to lock in rates below 4% but for most investment properties now (at least what I'm seeing in Ohio and Texas) we're getting around 5%.

Good luck with your first purchase!

I think that sounds fair. When refinancing with a traditional lender, I’m happy with anything in the 5-7% ballpark. I’m ecstatic if it’s below 5. However, over the course of 30 years, a few points makes little difference.

@Mo Muigai seems on higher end but not outrageous for small commercial, but what are the other terms of the loan and what is your financial situation? Could be awesome or “meh” more importantly, will they close?

Originally posted by @Mo Muigai :

Recently closed on residential with rate of 3.5%. I know investment properties run higher rates but is 5.75% a bit too high or that’s typical? This will be my first purchase of actual investment property.

Thanks!

 4-5% seems to be common. Make sure you work with a good lender that knows investment properties. Big banks may be difficult for these types of deals.

We paid 5.5% on a 20/5 arm portfolio loan for 16 units (8 properties) that closed in January.

Loan was to LLC

@Timothy Hero it’s actually conventional via Bank of America

@Cameron Tope yeah it’s conventional with 20% down 30 yr fixed for an investment property with Bank if America. Will keep shopping

@Jonathan R McLaughlin it’s regular conventional 30 yr fixed for a single family investment property. It will still cash flow about $200 but just didn’t know if that’s normal or too high. Loan amount is $58k on a $70k property

@Tom Ott definitely right! This is Bank of America 😯

@Jill F. Makes sense for such a size through LLC. This one is one SF for $70k and it's me not LLC

@Mo Muigai I think you are in the ballpark especially with a fixed rate. A little high but in the ballpark. It may come down with a ballon option.

Oops... didn’t read it’s not in an LLCs name. That definitely seems a little high.

@Mo Muigai

If it is a conventional 30yr then that rate is about right. I am doing a 5yr ARM 20yr AM as a commercial loan (LLCs allowed) for under 4 right now in my market of KY so they are out there for under 4 percent but on a shorter amortization. If you want to find this type of loan in your market ask for a commercial loan officer when you call the bank. If they can't finance your loan under a business entity they aren't a commercial loan officer. Ask for someone who can. Don't bother with the big banks though. They typically won't offer commercial financing on anything under $1MM. Sometimes the cutoff is higher.

Try Provident. You should get a better rate.

@Mo Muigai

Mine was 5.75% on a SFH in TX around this time last year.

@Mo Muigai   I'm paying between 5.5 - 7% on commercial loans, with 10 units total across 5 loans. 

@Mo Muigai

I closed on a SFH in San Antonio on 12/31/19 with 4.875% (0.1 points and no origination). It was a conventional (non LLC), 20% down, 30 yr am. Got quoted at 3.25% for a 15 yr from my credit union.

I negotiated quite a bit. As an easy way to save $$, I always take my best quote to Better.com and they will beat anything by $1000. Not an ad, I’ve just genuinely had a good experience from both an investor and personal perspective. They’ve never not beat another lender’s quote for me.

closed on an SFR with 4.75 last month and I have one right now quoting me 4.375. Those are both 80/20 30 year conventional fixed with excellent credit score.

@Mo Muigai keep in mind that the size of a loan makes a difference. If you finance $200k loan amount versus $75k loan amount your rate is higher for the lower amount. Does not seem fair but is reality.

@Mo Muigai

Do owner occupied. You’re only required to stay on the property for one year. That one year you can do Airbnb.

Originally posted by @Mo Muigai :

Recently closed on residential with rate of 3.5%. I know investment properties run higher rates but is 5.75% a bit too high or that’s typical? This will be my first purchase of actual investment property.

Thanks!

Best I have been able to get lately on conventional SFR investment is 4.875% w/ 0 points. You can probably do better by going through a broker.

@Mo Muigai - please, please, PLEASE...shop around.

If you have a good credit score, reach out to some of the mortgage-specific banks, e.g. Greentree. They are typically more competitive with rates, easier to underwrite, less red tape, etc.

Banks like Citizens and Bank of America will execute mortgages for you, but they need their overhead from you so they can turn around and sell it to someone else. Big banks will always put their business overhead costs on everything. Its no different than buying something retail price at Best Buy, or using a big company for plumbing like Horizon -- you will pay for their "company costs" on top of everything else.

Also check in with any local credit unions if you can. They sometimes offer competitive rates with low/no fees to handle mortgage/refinancing. If you have a relationship with them already, they might be spectacularly competitive.

One final note, you said you were putting 20% down, I would assume to put down 25% (plus closing costs!), that is standard for investment properties.

@Mo Muigai

Depends on a number of things, down payment amount, credit, and how many units? Around 5 to 5.25 I would say is within range but could be higher depending on the other factors. 25 percent is typical and will have those rates, 20 percent down at 5.75 would make sense since lenders price higher at that down payment level.