Investment Property Mortgage Loans

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Investment Property Mortgage Loans

Sam Shin
Real Estate Agent · Kailua, HI · Member since 2019 · 23 posts · 6 votes

There's a lot of info on the types of financing options for REI but I'm just really curious what type of financing most of you individual RE investors use?

And if you used investment property mortgage loans in particular, what percentages you worked with in terms of rates and down payment? What are your opinions on investment property mortgages in general? 

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Joshua Baker
Lender · Orlando, FL · Member since 2018 · 73 posts · 19 votes
7y

@Sam Shin

If you have no properties, I’d try to stay on the cheaper side of money if you can. There are conventional and conforming loans that can get the job done depending on employment and credit profile.

As others have stated, non-qm is another ball game where you can get some vastly different products but at a significantly higher cost long term.

Private and hard money are also options for short term bridge type loans, probably the most expensive funds available but they’re available rapidly and offer a ton of flexibility if your property needs rehab work done.

Hope this helps!

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  • Tom S.
    Real Estate Investor · Burlington, VT · Member since 2010 · 2k+ posts · 1k+ votes
    7y

    @Sam Shin  For standard conventional loans, 25% down and about 5.5% rate, 30 year term are some of the numbers I'm seeing.

    I also do a lot of loans that don't qualify for conventional financing due to condition (no kitchen, bathroom, etc) with smaller local banks.  Typically 20% down on purchase, 100% rehab all in one loan and closing (converts to normal loan after the rehab and draws are done).  0 points, 6% interest, 5 year fixed and then adj with prime, 20 year term.  

    Those loans are keep in house and usually the bank has my accts for rental income deposits, so a long term relationship.

    Hope that helps,

    - Tom

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  • Wayne Uwate
    Member since 2019 · 22 posts · 0 votes
    7y

    In the non QM world rates are generally in 6.5% and up. Seems high in today's world, but on the flip side you don't have to worry about DTI, since the loans are non income verified/stated. No DSCR requirements, and no worries about reserves since you don't need to show 6 months PITI on every property on your schedule of real estate, including the subject property.

    Essentially, if you have a stable 2 year work history, or 2 years verifiable self employment if you are, for example, a professional real estate investor, a good FICO, and can souce for 30 days your down payment, you are good to go.

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  • George DespotopoulosBusiness Member
    Lender · New York, NY · Member since 2016 · 936 posts · 287 votes
    7y

    @Sam Shin it depends on your deal and credit score/experience. There are non-bank investment property lenders that can lend to you, on a 30 yr loan term, anywhere from 5.5% - 9%. These can be to you in your name or in an LLC (preferred). Usually the downpayment will be 20% - 30%. Working with non-bank lenders has it's pros and cons.

    Pros: much quicker than conventional, can invest through an LLC, more flexible requirements, no income or personal DTI requirement, no tax returns required, no limit or a higher limit of loans you can have outstanding (not capped at 10 properties) etc.

    Cons: more expensive as there's an origination fee paid at closing of 2 - 2.5% of the loan amount and the rate will be a little higher. 

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  • Sam Shin
    OP
    Real Estate Agent · Kailua, HI · Member since 2019 · 23 posts · 6 votes
    7y

    @George Despotopoulos would it behoove me to establish an LLC? I'm just starting out as a self-representing RE agent-buyer and wondering what the best strategy would be at this point.

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  • Joshua Baker
    Lender · Orlando, FL · Member since 2018 · 73 posts · 19 votes
    7y

    @Sam Shin

    If you have no properties, I’d try to stay on the cheaper side of money if you can. There are conventional and conforming loans that can get the job done depending on employment and credit profile.

    As others have stated, non-qm is another ball game where you can get some vastly different products but at a significantly higher cost long term.

    Private and hard money are also options for short term bridge type loans, probably the most expensive funds available but they’re available rapidly and offer a ton of flexibility if your property needs rehab work done.

    Hope this helps!

    1Reply
  • George DespotopoulosBusiness Member
    Lender · New York, NY · Member since 2016 · 936 posts · 287 votes
    7y

    @Sam Shin I would form one and then based on what financing you obtain either use it or take the title as an individual (which conventional will most likely require you to). Forming an LLC provides you a bit more protection (protects your personal assets) in a situation where you're being sued for something related to the ownership of that property.

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