Financing and Lending for Experienced Investors

5 Replies

Hi BP family,

I'm a first time investor, and thanks to all of y'all, I'm about to purchase my first multi-unit property. I'm located in San Diego but I'm purchasing this property in Las Vegas. I have the cash to purchase this property, but I'm asking the more experienced investors on what they would do to leverage financing from the banks so I don't have to deplete my capital. Ideally I want to put 20% down and finance the other 80%, but how do I go about doing this and what interest rates would make sense?

The end goal for me is to figure out the cost of my mortgage relative to my NOI because I will be looking to Refi the property in the future.

Looking forward to your replies,

Hi @Andrew Meng ,

Congrats on your multi-unit property in Las Vegas! I, too, am looking to expand to Las Vegas and invest in commercial multi-family there. How many units is this property? There are different loan programs for properties with 4 or less units and 5+ units. In my experience, I was able to purchase my 2 unit property with 15% down. For my 16 unit property, I had to put 25% down. Have you contacted any lenders to see what loan programs they offer so that you can compare and choose the one that best suits your goals?

@Andrew Meng I would like to hear more about your property and some of the research / steps you employed.  I'm a fellow San Diego resident who is also interested in multi-units OOS.

In response to your question, from the research I've been doing (and outside of the residential vs commercial aspect that @Sherwin Gonzales brought up), a big part will be your comfort level and financial goals.  Many will suggest you leverage as much as possible if you are still in a positive cash flow situation and you have the reserve funds necessary to cover any issues.  Others will say to pay it off as quickly as possible and use the cash flow to start saving for your next property that way it's really hard for things to go south on you.

If your multi-unit is residential I would recommend trying to secure a bank loan since you can get them at a low interest rate for 30 years and then enjoy the cash flow and start looking at other investments.  Good luck!

Originally posted by @Andrew Meng :

Hi BP family,

I'm a first time investor, and thanks to all of y'all, I'm about to purchase my first multi-unit property. I'm located in San Diego but I'm purchasing this property in Las Vegas. I have the cash to purchase this property, but I'm asking the more experienced investors on what they would do to leverage financing from the banks so I don't have to deplete my capital. Ideally I want to put 20% down and finance the other 80%, but how do I go about doing this and what interest rates would make sense?

The end goal for me is to figure out the cost of my mortgage relative to my NOI because I will be looking to Refi the property in the future.

Looking forward to your replies,

 Right now, money is cheap.  Leverage it as much as you can using low interest rates.

4 units is going to require 25% down if it's a Fannie Mae backed loan.

Stephanie

Thanks for the input everyone, I really appreciate it.

@Sherwin Gonzales I contacted a local lender that gave me a 70% LTV so basically requires a 30% down payment at a 5.6% 30 year fixed. That interest rate seems really high to me so I will be contacting a few other lenders to see if they have more competitive rates.

@Steve O'Keefe What's up neighbor! That's awesome, I'm originally from Vegas so I know the market pretty well. Basically I browsed through many off-market properties and ran the numbers on each and finally came across one that made sense. Now I need to find a lender who will work with me at the interest rates I'm looking for (~4%). I do believe in 30 year loans as opposed to 15 year loans on short term rentals because I'd prefer to cashflow first then refi or sell within a year or two.

For everyone else: What was your LTV and interest rates for your first investment property and how many banks/lenders did you talk to before finding one that best suits your situation? Thanks!

@Andrew Meng what kind of property is it? that will determine what time lending can be used.

by the sounds of it, it's a 4unit or less. 70% LTV is fannie mae standard U/W and afterwards. This seperates these 2 processes and lets you tackle each on much more favorable terms. Buying cash makes for a much smoother process, allows you to close faster and be more competitive. Lining the loan up afterwards is similar, there is no time crunch for closing and gives you time to search for best funding.

other than that, you can search for better rates but you'll be within .25% of that most likely

congrats!!