Non commercial loans for investors in non occupied properties

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Non commercial loans for investors in non occupied properties

Skyler Carpenter
Member since 2022 · 11 posts · 4 votes

Hello all,

New to Bigger Pockets and real estate investing. So far I have been in "education mode" trying to learn as much as possible. I have looked at a single-family home and a triplex. I have contacted a couple of banks to ask what my financing options are. I have been told that if I don't occupy the property, my only traditional financing option is a commercial loan. I keep reading books and listening to Bigger Pockets podcasts (amen to those!), hearing about people financing properties for 10% or less down but I don't find any information that elaborates on it unless it is owner occupied. Can someone point me in the right direction or elaborate on the different loan types that are available? Any help would be greatly appreciated!!

I hope this is posted in the right spot?!?

Skyler

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Dave Skow
Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes
4y

@Skyler Carpenter- 1)  you might   contact  the  banks and  credit  unions  in your area  as  they  might have some special programs  2) most low down payment  programs are  designed for primary / owner  occupied  scenarios    3)  there are  rental property  loan  programs that allow as little  as  15% down  payment  4)  commercial loan  terms  will be much  worse than what you can   get on  the resedential side  of things 

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  • Karl McGarvey
    Real Estate Agent · Houston, TX · Member since 2019 · 763 posts · 500 votes
    4y

    Owner occupied properties are a great way to get into investing because of the lower interest rates and lower down payments. These are two reasons why House hacking is such a powerful tool. Conventional investor loans are going to cost you 25-30% down with appx 1% higher interest rate to get into a property. There are lenders out there who have other programs like hard money etc, but to truly take advantage of the special programs the lenders are going to want to have a relationship with the borrower and see that they have a low risk business for them to know theyre going to get paid back. 

    If youre really needing to go the low money down route, buy a house with a conventional loan, occupy it for a year, and move to another home in a year while renting this one out. Even easier to do if you are able to make income while living in the home by renting out rooms.

    1Reply
  • Jared HottleBusiness Member
    Real Estate Agent · Cedar falls IA Waterloo, IA · Member since 2020 · 902 posts · 549 votes
    4y

    Just like Karl said conventional loans are available but non-owner occupied but will require at least 20% down and usually not as good a rate but is fixed for 30 years so thats nice. When it comes to commercial in-house financing every bank will do it different. Highly recommend reaching out to 25-30 local banks. Tell them what your plan is and see what they can do for you. If you really need 10% down and are willing to give up other terms then let them know that. You will be surprised what you will find.

    [email protected]319-288-5382
    Jared Hottle Real Estate59 Reviews
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    0Reply
  • Kevin Luttrell
    Lender · Orange County, CA · Member since 2019 · 299 posts · 255 votes
    4y

    @Skyler Carpenter Yes you can get normal Conventional financing for non-owner occupied properties. For 1-unit properties you can actually do as little as 15% down (although you get much better pricing at 20% and 25% down). 2-4 units requires 25% down. If you buy as a vacation home, you can do as low as 10% down. 

    0Reply
  • Skyler Carpenter
    OP
    Member since 2022 · 11 posts · 4 votes
    4y

    Thanks for the replies. I will have to do some checking with additional banks to see what they have to offer. It's good to know there are other options out there.

    0Reply
  • Eric GoldmanBusiness Member
    Lender · PA · Member since 2019 · 359 posts · 192 votes
    4y

    you dont have to go commercial, go to a local met up, meet some LO's.

    484-574-4878
    G2loans- Investor and Commercial Mortgages531 Reviews
    WebsiteView Page
    0Reply
  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    4y

    If you wan't to occupy the property and have a low down payment, go with a conventional loan. Most lenders want 15% down for a DSCR loan. This program is for non-owner occupied 1-4 unit properties and qualifies you based on cashflow, credit, and history of ownership.

    [email protected]818-269-7983
    LuxePrivate Investments LLC 572 Reviews
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    0Reply
  • Skyler Carpenter
    OP
    Member since 2022 · 11 posts · 4 votes
    4y

    I wish ther we're local meetups. I have look and there is nothing in the rural area I live and am looking to invest. I have a list of lenders that I'm going to call and see what they can provide. I appreciate the replies and advice!

    1Reply
  • Dave Skow
    Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes
    4y

    @Skyler Carpenter- 1)  you might   contact  the  banks and  credit  unions  in your area  as  they  might have some special programs  2) most low down payment  programs are  designed for primary / owner  occupied  scenarios    3)  there are  rental property  loan  programs that allow as little  as  15% down  payment  4)  commercial loan  terms  will be much  worse than what you can   get on  the resedential side  of things 

    1Reply
  • Bonnie Griffin KaakePro Member
    Real Estate Consultant · Denver, CO · Member since 2021 · 666 posts · 389 votes
    4y

    @Skyler Carpenter - There are investors who will loan on non-owner-occupied commercial properties. Their interest rates may be a bit higher but don't overlook that possibility. Just be sure the numbers work for everyone. 

    Keep in mind that you can also leverage cost segregation and get as much as 6-10% of the purchase price in upfront state & federal taxes you do not have to pay. This can be a tremendous help for those who need extra cash flow to repair a property they purchase or to invest in another property. And, if you can't use all that extra cash flow in the first year, you can roll it forward to future years until you have used it up. 

    [email protected]303-475-4459
    0Reply
  • Nick BelskyBusiness Member
    Lender · Orlando, FL · Member since 2021 · 1k+ posts · 704 votes
    4y

    @Skyler Carpenter

    You don't necessarily use a commercial loan for a NOO 1-4 unit... That's totally incorrect. These loans are called Non-QM. If you go 5-8 units, many will do a mixed use residential loan, then 9+ is strictly commercial. There are commercial loan options for lesser than 9 units, but if not doing a blanket, then why spend the extra money for the loan? Nearly all of these options will require 20% down or so.

    If you are looking for lower down payments, then you are looking at Owner Occupied 2-4 units, house hacking (FHA Loans) to get in for less. Some SBA programs may also do 10% down or so.

    Cheers!

    [email protected]
    Belsky Mortgage, LLC522 Reviews
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    0Reply
  • Skyler Carpenter
    OP
    Member since 2022 · 11 posts · 4 votes
    4y

    Thank you!!

    0Reply
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