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Milind Torney
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Financing for investement property (newbie question)

Milind Torney
Posted Feb 7 2024, 07:32

Hi all,  I am new to real estate investing. I have finalized the investment property and researching conventional load options. 

1. As I understand, interest rates for investment property are priced higher. Is there any creative options here? I cannot use it is as primary home 

2. I am flexible with downpayment. With 25%. downpayment, I got quotes of 7.5% APR (30 year fixed). with no points. Is it good rate? What is the best rate I should be targeting in the current market.

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Jacob Sherman
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Jacob Sherman
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Replied Feb 7 2024, 15:30

Yup theres a slight premium in rate for an investment property . 7.5% if going full doc with 0 points sounds reasonable . What is the scenario looking like as far as credit and purchase proce ? what type of property is it ? 

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Milind Torney
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Milind Torney
Replied Feb 7 2024, 16:33

thanks! This is for single family property. new construction in CA priced at 500k 

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Erik Estrada
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Erik Estrada
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Replied Feb 7 2024, 16:39
Quote from @Milind Torney:

thanks! This is for single family property. new construction in CA priced at 500k 


 Hi Milind, 

Depending on your FICO and DTI you may be Able to get 7.125 with no points. Are you getting quoted with a Credit Union or Bank?

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Jamie Jones
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Jamie Jones
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Replied Feb 9 2024, 12:32

Hi Milind, yes I'd say 7.5% is fair rate for the current market on a rental. A lot depends on your credit score as well, 780+ is top tier as far as pricing out conventional mortgages. 

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Jake Andronico#4 House Hacking Contributor
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Jake Andronico#4 House Hacking Contributor
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Replied Feb 9 2024, 13:37

@Milind Torney

Welcome to BP and REI!

Over the hill in Reno we've locked in investors at less than 6% for new construction. Feel free to reach out. Could be a similar story in Sac potentially. 

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Benjamin Aaker
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Replied Feb 9 2024, 14:31

For creative options you could ask the seller to finance it. You could pay cash and finance later. Indeed, you would have a higher interest rate for this commercial loan. Getting a 30-year fixed mortgage on a commercial loan is pretty nice. I would be happy with the 7.5%. Of course the purchase price would have to be right.

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Noah Laker
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Replied Feb 10 2024, 19:44

Hey Milind, I'm a local broker, investor, and property manager (100+ STR/Airbnb properties in addition to LTR).

We offer mortgages through our subsidiary company, wholesale to over 100 banks and institutions. From my experience, most lenders are offering the same APR's. The real difference between lenders is gonna be origination costs / fees, which can amount to thousands or even 10s of thousands in closing costs, depending on the size of the loan. We cut out the middlemen to get these as low as possible, so be sure to use a wholesale lender rather than a more salesy loan officer.

Some newer investors try to use hard money or more creative solutions. This will result in much higher costs up front, higher interest rates, and ultimately an expensive refinance down the line. 

Good on you for saving up a substantial down payment so you don't have to go down that road. 

By the way, what kind of property are you looking to purchase? STR? Multifamily? Here in Sac or elsewhere?

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Michael Smythe
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Michael Smythe
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Replied Feb 11 2024, 07:33

Which loan do you think a borrower will pay first, the one on their primary or on their rental?

Obviously, most would pay on their primary and let the rental go to foreclosure if needed.

So, rentals are riskier loans for lenders!

In the world of investing, Risk and Return are linked - the higher the risk, the higher the required return.

So, there is NO WAY around paying a higher rate (assuming the same loan type) on a rental property - unless you want to commit fraud.

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Dale K Poyser
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Replied Feb 12 2024, 06:05

@Milind Torney if it is new construction I would suggest seeing if the builder has incentives through their preferred lender. Most incentives are based on you occupying the property, but maybe you can get second home financing? Either way def worth looking into.

Another option is negotiating the sales price. I have learned in this game that everything is negotiable. You can also ask the builder to buy down the interest rate.

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Tanner Lewis
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Tanner Lewis
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Replied Feb 12 2024, 08:56

As you look for a new lender, look for one that matches your investment strategy and can decrease the friction of buying as much as possible. Most borrowers typically migrate from traditional to DSCR financing once encountering roadblocks with DTI and concentration limits with conventional financing. You can go the creative route, but it is just very deal-dependent, and you end up missing out a lot on other deals that make sense with other financing options. I suggest using a combination of the two and just going with whatever option makes the most sense based on your deal.

With a 25% down payment, I would say that is about on par with the market, but at least with DSCR lending, it really depends on the deal and the borrower. If you have an 800 FICO, low leverage, and high cash flow, the rate should be a little lower. If you have a 630 FICO, high leverage, and no cash flow, I would expect the rate to be higher. It is really hard to tell someone something is a good rate just based on the rate, LTV, and points, but search around with a couple of lenders and see where their options line up.

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Milind Torney
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Milind Torney
Replied Feb 13 2024, 12:39
Quote from @Erik Estrada:
Quote from @Milind Torney:

thanks! This is for single family property. new construction in CA priced at 500k 


 Hi Milind, 

Depending on your FICO and DTI you may be Able to get 7.125 with no points. Are you getting quoted with a Credit Union or Bank?


I got the quotes mostly from Bank. Lowest rate that I got is 7.5 with 25% down 

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Milind Torney
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Milind Torney
Replied Feb 13 2024, 12:40
Quote from @Jamie Jones:

Hi Milind, yes I'd say 7.5% is fair rate for the current market on a rental. A lot depends on your credit score as well, 780+ is top tier as far as pricing out conventional mortgages. 


 thanks 

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Milind Torney
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Milind Torney
Replied Feb 13 2024, 12:45
Quote from @Benjamin Aaker:

For creative options you could ask the seller to finance it. You could pay cash and finance later. Indeed, you would have a higher interest rate for this commercial loan. Getting a 30-year fixed mortgage on a commercial loan is pretty nice. I would be happy with the 7.5%. Of course the purchase price would have to be right.


 In my case, it is new construction. Purchasing directly from the builder 

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Milind Torney
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Milind Torney
Replied Feb 13 2024, 12:52
Quote from @Noah Laker:

Hey Milind, I'm a local broker, investor, and property manager (100+ STR/Airbnb properties in addition to LTR).

We offer mortgages through our subsidiary company, wholesale to over 100 banks and institutions. From my experience, most lenders are offering the same APR's. The real difference between lenders is gonna be origination costs / fees, which can amount to thousands or even 10s of thousands in closing costs, depending on the size of the loan. We cut out the middlemen to get these as low as possible, so be sure to use a wholesale lender rather than a more salesy loan officer.

Some newer investors try to use hard money or more creative solutions. This will result in much higher costs up front, higher interest rates, and ultimately an expensive refinance down the line. 

Good on you for saving up a substantial down payment so you don't have to go down that road. 

By the way, what kind of property are you looking to purchase? STR? Multifamily? Here in Sac or elsewhere?

I am trying to purchase single family home in Elk Grove.

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Milind Torney
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Milind Torney
Replied Feb 13 2024, 12:53
Quote from @Michael Smythe:

Which loan do you think a borrower will pay first, the one on their primary or on their rental?

Obviously, most would pay on their primary and let the rental go to foreclosure if needed.

So, rentals are riskier loans for lenders!

In the world of investing, Risk and Return are linked - the higher the risk, the higher the required return.

So, there is NO WAY around paying a higher rate (assuming the same loan type) on a rental property - unless you want to commit fraud.


 thanks, understand :) 

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Milind Torney
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Milind Torney
Replied Feb 13 2024, 12:54
Quote from @Dale K Poyser:

@Milind Torney if it is new construction I would suggest seeing if the builder has incentives through their preferred lender. Most incentives are based on you occupying the property, but maybe you can get second home financing? Either way def worth looking into.

Another option is negotiating the sales price. I have learned in this game that everything is negotiable. You can also ask the builder to buy down the interest rate.


 thanks! 

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Milind Torney
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Milind Torney
Replied Feb 13 2024, 12:56
Quote from @Tanner Lewis:

As you look for a new lender, look for one that matches your investment strategy and can decrease the friction of buying as much as possible. Most borrowers typically migrate from traditional to DSCR financing once encountering roadblocks with DTI and concentration limits with conventional financing. You can go the creative route, but it is just very deal-dependent, and you end up missing out a lot on other deals that make sense with other financing options. I suggest using a combination of the two and just going with whatever option makes the most sense based on your deal.

With a 25% down payment, I would say that is about on par with the market, but at least with DSCR lending, it really depends on the deal and the borrower. If you have an 800 FICO, low leverage, and high cash flow, the rate should be a little lower. If you have a 630 FICO, high leverage, and no cash flow, I would expect the rate to be higher. It is really hard to tell someone something is a good rate just based on the rate, LTV, and points, but search around with a couple of lenders and see where their options line up.


 thanks! 

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Noah Laker
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Noah Laker
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Replied Feb 14 2024, 02:53
Quote from @Milind Torney:
Quote from @Noah Laker:

Hey Milind, I'm a local broker, investor, and property manager (100+ STR/Airbnb properties in addition to LTR).

We offer mortgages through our subsidiary company, wholesale to over 100 banks and institutions. From my experience, most lenders are offering the same APR's. The real difference between lenders is gonna be origination costs / fees, which can amount to thousands or even 10s of thousands in closing costs, depending on the size of the loan. We cut out the middlemen to get these as low as possible, so be sure to use a wholesale lender rather than a more salesy loan officer.

Some newer investors try to use hard money or more creative solutions. This will result in much higher costs up front, higher interest rates, and ultimately an expensive refinance down the line. 

Good on you for saving up a substantial down payment so you don't have to go down that road. 

By the way, what kind of property are you looking to purchase? STR? Multifamily? Here in Sac or elsewhere?

I am trying to purchase single family home in Elk Grove.

 Elk Grove is awesome. The municipality deserves much credit for its pro-growth policies. Lots of new restaurants and attractions are moving in, and new residents by extension. 

Feel free to DM me if you would like to work with my team for the acquisition.

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Scott Scoville
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Scott Scoville
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Replied Feb 14 2024, 14:42
Quote from @Milind Torney:

Hi all,  I am new to real estate investing. I have finalized the investment property and researching conventional load options. 

1. As I understand, interest rates for investment property are priced higher. Is there any creative options here? I cannot use it is as primary home 

2. I am flexible with downpayment. With 25%. downpayment, I got quotes of 7.5% APR (30 year fixed). with no points. Is it good rate? What is the best rate I should be targeting in the current market.


Hey Milind, getting a number of seller finance and creative finance opportunities in Sacramento that cash flow. May be something that you want to consider with rates being higher. DM for more details.

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