First Deal: How Should I Finance?

Question

I am looking into purchasing my first long-term, buy and hold rental property (my dad currently owns 3 units but this is the first I will be involved in).  Just looking into some suggestions on the financing.  I am considering several multifamily properties in the Warren/Niles, OH area (approx. 50k - 100k).

I have about 10k available for a down payment.  What are some of the options other investors have used?

I talked to the local credit union where I am a member.  The loan officer discussed two options - either get the loan through Fannie Mae/Freddie Mac or go more of the commercial loan route.  I'm thinking the interest rate would be lower on the Fannie/Freddie option.  I believe the benefit of the commercial is that they are focused more on the cash flow of the property rather than my W-2 income.

Overall, I'm just curious about what other first time investors have used for buy and hold properties.  Let me know your suggestions.

Adam Bontrager · Answer

Can anyone tell me what kind of interest rates they've gotten through fannie/freddie or FHA in the past few months?  I'm thinking right around 4% since it's an investment property versus a owner occupied home (except for the FHA option) but don't know if that's realistic.  The loan officer I spoke with wasn't too forthcoming with rate information.

Ivory Hayes · Answer

I'm a buy and hold investor and I actually got one of my first properties through line of credit. I wanted to keep overhead as low as possible so I bought in the midwest and line of credit was enough for a complete purchase. If you can't generate enough money to come up with the down payment for a conventional loan you could always go after seller financed deals.

Much success to you Adam, stay positive!

Oliver Trojahn · Answer

You want a conventional (freddy/fannie) loan if you can get one.  You could buy a place and live in it and only put 3.5% down on an FHA.  You want as many freddy fannie loans as you can get your hands on.

You will need 20-25% down for an investment property through freddy fannie

Oliver Trojahn · Answer

You want a conventional (freddy/fannie) loan if you can get one.  You could buy a place and live in it and only put 3.5% down on an FHA.  You want as many freddy fannie loans as you can get your hands on.

You will need 20-25% down for an investment property through freddy fannie