I currently have one investment property that I closed on 6 months ago. I have a tenant in the house and she pays like clockwork and it’s cashflowing nicely.
Im really wanting to expand my portfolio in 2019 and it seems my biggest hurdle at this point is finding the capital/funding for the deals. I know there are a wide number of options to find funding (traditional bank, private money, hard money, etc.), but I’m wanting to know which funding options have y’all had the most success with and why?
I spoke to my first private money lender yesterday and he was offering a 30yr fixed loan at 7.5% with a min loan amount of 75k, and a prepayment penalty for the first 3 years. Does this sound pretty normal?
Any advice is greatly appreciated!
If you have the capital for down payment and good income (enough to support buying new rentals) I would suggest that you get a conventional mortgage through a bank or mortgage lender until you reach the max allowable properties with them (10 I think it is). You will get lower fees, lower rates, and net more income on your rentals.
If you do not have all of that then I would say private or hard money and that scenario sounds like an average scenario from a private lender.
The system that has worked well for me is to use my own cash plus HELOC's plus private money for "short term" financing. Then repositioning (a.k.a. refinancing) into a nice, long term, fixed interest mortgage after rehab.
If you haven't learned about it yet it's called BRRRR (Buy Rehab Rent Refinance Repeat)
For example I got a deal for $37K which I used a $31K HELOC plus some of my own cash. Then I used a private loan (12% interest only, balloon after 12 months with no prepayment penalty) to finance a $38K rehab. Once the rehab was done (about 3 months) I did a cash-out refinance with a portfolio lender for about $75K. This was 80% LTV at 5% interest amortized for 30 years.
I did incur some closing and holding costs but at the end of the day I was left with only a few thousand in the deal.
Use the riskier, higher interest rate debt for short term only and have an exit plan to either sell/flip (and pay off the debt) or refinance to pay off the debt.
Nice deal . . thanks for sharing.
Wanted to know was there any additional feed on the 30 year refinance?