My wife and I are starting to jump in and make offers on potential rental properties. We live in the Kansas City area and are targeting properties in certain Johnson County locations. I have a pretty good relationship with a mortgage broker in our area and have already worked out financing through this lender. However, I've been speaking with a few local mortgage banks who happen to be portfolio lenders. I'm curious if anyone has any suggestions on what questions I should ask these lenders to help decide which one might be the best fit for us.
Since you are just starting out, I would go with a normal mortgage broker who will give you a standard Freddie Mac / Fannie Mae loan. Get yourself 2 or 3 rentals, make sure you qualify easily enough (income / DTI ratios / credit score / etc) ... and most importantly make sure you enjoy being a landlord. Some people become landlords, and then hate it with a passion. Some people love it. Until you do a few of them...make sure you enjoy it first, and that you have a good business system down in place for dealing with tenants, the financial part of it, etc - whether you manage your own properties or not.
Personally, I'd advise against using a mortgage broker for too many properties as once you hit the Fannie Mae / Freddie Mac cap of 10 loans, that could mess up your own life if you find yourself earning more income down the road and want to buy yourself a newer & nicer main residence.
Anyway...after your first 2 or 3 loans through your mortgage broker, I'd then consult a portfolio lender or local bank for providing you loans. What would you ask them? The same thing you'd ask your mortgage broker...what are your standard loan terms for someone with good income/credit/cash reserves...interest rate, loan length (e.g. a portfolio lender may only do 5-10 year notes, vs Fannie Mae's 30 year notes), etc, etc - nothing complicated or that different.
Hi @Vince Cline when dealing with rental properties or investment loans in general the very first and most important question I think I would ask any potential lender is "Do you offer rehab loans?" The reason for this is because many traditional banks, lenders, mortgage brokers don't offer or have access to rehab loans. Most properties you will come across in the KC area will need rehab. So I would want to know the type of loan possible. Sure, most lenders offer investment loans but many of these are once the property is already fixed up and rented. Flipping? Again, many traditional lenders don't offer rehab loans.
Just my 2 cents.
Congrats for taking action and jumping into investing!
You must be a BiggerPockets member to post on the forums
Join the world's largest, most open Real Estate Investing Community online, 100% free forever!