I am looking to buy an investment property in Florida. The type of loads I have since out there are conventional loans with 20% down. Are there any loans that require only 10% down or even less? Also if there is, what is required, like an extremely high credit score as an example?
Rental Property Investor · Edmond, OK · Member since 2017 · 1k+ posts · 1k+ votes
6y
As far as I know, the only types of bank loans that will allow you to put less than 15% down as an investor are going to be commercial loans. Typically these will be loans to a business entity (LLC) and will be based off of appraised value instead of purchase price. If you are buying a house that has significant room for value-add, this may be an option for you. But if you are buying retail or turn-key style homes, you are probably still going to have to bring a decent down payment in.
If you are planning to buy investment properties and you are willing to live in the property, you can utilize owner occupant loans. These do allow as little as a 5% down payment for conventional loan products. If you go this route, you will be required to sign a document that verifies that you intend to occupy the property.
Homeowner · Kingston, MA · Member since 2013 · 36 posts · 2 votes
6y
I believe you can buy a vacation property for 10% down. The recent podcast with Avery Carl #364 discussed this for acquiring short term rentals. Unless I misheard, she and her husband bought their first two investment properties individually to take advantage of this reduced rate.
With traditional lending you have a couple options.
1. 2 mortgages a traditional 20% down mortgage with a second mortgage to cover the 10% extra you need. This costs more in terms of fees and interest rates will generally be higher.
2. You can do an FHA loan with as little as 3.5% down but that has other downsides. Modern FHA loans do not allow you to ge rid of mortgage insurace once you get past 20% equity. So you will have to pay that fee for the life of the loan. Also they have residency requirements so don't really work for out of state owners for obvious reasons.
With non-traditional lending you also have options.
1. Private captital, you can get a hard money loan to acquire the property and stablize it. If it is vacant or unoptimized you can add value that way and then go for a refinance in about 6 months or so. Interest rates are higher with this but the process is significantly easier and is valued differently. For example I do hard money lending and we have advantageous terms for those who want to add value to the poperty and we can move faster than banks as do most hard money lenders.
2. Bring in equity capital from another investor and then get a traditional loan. This has upsides as you can get cheaper capital from banks, however it complicates the decision making process as both (or all) parties have to agree on many things through out the process of buying as well as operating the property.
I would be happy to speak with you more if you would like some additional general information. Feel free to shoot me a direct message if you would like to speak.
Real Estate Investor · Littleton, CO · Member since 2013 · 197 posts · 77 votes
6y
It's feeling a lot like 2007, be careful not to put your self in a poor equity or cash flow position to avoid strategic foreclosure. When there is a correction. Also if in vesting in FL google "The Silver Tsunami In Housing"
Lender · Austin, TX · Member since 2020 · 5 posts · 3 votes
6y
@Hector Lewis
It's possible if you are buying right, have experience to show a lender, and there is a rehab budget for value add. Some lenders will let you put less down because they know with a value add there will be more equity in a property. Say it is turn key and lender wants 25% down on a 200k property. They know property will have 50k equity right out the gate. Let's say there is a value add situation on a 120k purchase. 10% down is 12k and loan is 108k. Rehab budget is 42k. Lender will Loan you 75% of ARV(200k) because they see the value add and equity potential if the have to take the property back. They will give you a loan up to 150k. Those scenarios are typically the only ones where you can get that low on down payment for investment properties.