Investor · Baton Rouge, LA · Member since 2011 · 133 posts · 13 votes
I just got a quote from our lender on a rental property. Is this typical with what you guys are seeing in your area? Also are you guys getting a better interest rate?
5 year balloon at 5.711 interest rate Amortized over 30 years.
So, not to negate anyone in this thread's advice that you can get better rates, because you may be able to, however it's important to know all the details when comparing rates. It's likely that all the other posters quoting rates @ 30 year terms have residential loans, these rates and terms will simply not be comparable for you.
5.71 isn't bad, you should expect 20 year amortization-ish
always call around and shop rate/terms. What you have isn't bad though.
I would suggest that you shop around to see what the norm is for your area. On my recent purchase, I obtained a loan for 4.8% fixed for 30 years. Check with local banks and credit unions, they may be less expensive and have more options for you.
@Jake Thomas- Ok thanks, I have this lender that lends 80 percent of ARV on a construction loans interest only for 9 months and then it converts over to a 30 year loan. So basicly I buying a rental property with out a down payment.
@Patrick Rowe yes.. I just posted a thread about that a couple days ago and most lenders (well around me at least) all require 20% down for an investment property. I also had a local bank offer me a 15yr fixed rate or a 30yr adjustable rate. I obviously am going to go with the lender who is offering 30yr fixed.
@Dawn Curry- Ok, I will shop around to see If I can get some better rates. This is my second rental that he has finance and it's hard passing up no money down.
is this a business loan? Everyone is saying that it's low, but situations differ greatly. I just took a 4.5% loan on my primary so 5.71 on a rental seems pretty good to me.
Like I said though, the type of loan and other factors do matter. My rate is higher because it's a cash out refi, your rate will be higher if it's a business loan, etc. Shop around though, if other people are getting lower rates, you may be able to as well.
The problem I found with financing 100% is that it decreases your cash flow. I built a 3-2 brick and get $1175. But taxes and the loans eat up my cash flow.
So, not to negate anyone in this thread's advice that you can get better rates, because you may be able to, however it's important to know all the details when comparing rates. It's likely that all the other posters quoting rates @ 30 year terms have residential loans, these rates and terms will simply not be comparable for you.
5.71 isn't bad, you should expect 20 year amortization-ish
always call around and shop rate/terms. What you have isn't bad though.
@Alexander Felice- Yes, I just realized the other rates were residential. I will check with some other local lenders, but I think this is really competitive on a 30 year business loan.
Hey @Patrick Rowe, I was going to say it, but @Alexander Felice already nailed it. You are doing a commercial loan in the name of your business and that will almost always be higher than if you get the loan in your own name like I'm sure most of the above posts are referring to. It is a unusual to get a 30 yr amortization for a commercial loan. I wouldn't mind that rate because with the amortization, you are still working with numbers that will probably cash flow well.
I also wanted to add, @Eben Cook makes a point that I think deserves some discussion. 100% financing of cost is not the same thing as 100% of FMV. Patrick is well positioned, as a builder/investor, and I'm sure his cost total acquisition cost is well below the value of the property. I try and usually succeed at 100% financing on all of my pre-existing properties, but I am not leveraged over 80% of value on any of them. There's a big difference.
I also wanted to add, @Eben Cook makes a point that I think deserves some discussion. 100% financing of cost is not the same thing as 100% of FMV. Patrick is well positioned, as a builder/investor, and I'm sure his cost total acquisition cost is well below the value of the property. I try and usually succeed at 100% financing on all of my pre-existing properties, but I am not leveraged over 80% of value on any of them. There's a big difference.
very well said. 100% financing of FMV and 100% financing of cost are very different. Financing 100% of value can be risky. financing 100% of cost @ 80% of value is THE DREAM!
also:
Originally posted by @Robert Leonard:
Hey @Patrick Rowe, I was going to say it, but @Alexander Felice already nailed it. You are doing a commercial loan in the name of your business and that will almost always be higher than if you get the loan in your own name like I'm sure most of the above posts are referring to. It is a unusual to get a 30 yr amortization for a commercial loan. I wouldn't mind that rate because with the amortization, you are still working with numbers that will probably cash flow well.
agreed, MY BANK WON'T DO THOSE TERMS FOR ME!!!!!!!!!!!!!!!!!!!!!!! /vent
the main reason I popped back in here was to say again that 5.7 @ 30 for a commercial loan is actually pretty freaking good haha. You're probably bumped up in rate a little bit to subsidize the long term but if you're cash flow positive I would take it!
@Robert Leonard-Hey Robert you are correct, the property appraisal for $91,500 and the bank will loan me $73,500. Also the purchase price is $48,900 and it will cost me around $18000 to renovate which will put me at $66,900. That will put me well below ARV.
@Patrick Rowe I got a term and rate sheet last month from a local community bank for a commercial loan titled in our LLC name. It was for a 5/1 ARM,amortized over 20 years,80%LV with an interest rate of 4.25%. This was a cash out refinance loan on a free and clear property.We bought carryout seafood at Tony's back in January. Excellent eating. Going back in April to see the daughter