Real Estate Broker · Franklin, TN · Member since 2015 · 7 posts · 1 vote
Hey everyone, I'm just getting started on this new journey and I've identified what seems to be a nice first investment property. I've been using (and loving!) the rental tool here on BP to analyze different properties. If all things work out, I would buy, rehab, and rent it out. My question is, do any of you have guidance with using a 5/20 loan? I've never heard of this option.
From what I understand, I finance for 5 years with payments amortized over 20 years with 10% down. At the end of 5 years, I must pay the balance or refinance. Can you share with me some of your thoughts and experiences using this method?
Flipper/Rehabber · McKinney, TX · Member since 2015 · 381 posts · 72 votes
10y
As far as portfolio investor friendly banks go this is basically the only option you have. This is why there is lots of talk of maxing out as many 30 year loans as one can before going another route like this. If it is a true deal the numbers should work with the 20 year though and you can still cash flow. It is a very normal thing for investors, nothing to worry about or shy away from.
Rental Property Investor · Lindon, UT · Member since 2015 · 862 posts · 438 votes
10y
What is the interest rate on the 10% down, 5 yr fixed, 20 yr amort loan? Who is providing it, what are their fees and did you have to show your income?
Real Estate Broker · Franklin, TN · Member since 2015 · 7 posts · 1 vote
10y
@Lance, thanks for confirming this is standard now. The numbers do still work and provide a positive cash flow after expenses and holding for vacancy, cap ex, and even management for later purposes. Of course not as much.
@Darren, the rate is 4.75 from Simmons Bank and not sure of breakdown of fees but I believe it is about $3K for closing. Also, yes, I am required to show income.