New Investor looking for advice on what loans to use.

Allentown, Pennsylvania
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New Investor looking for advice on what loans to use.

Brian McGuire
Member since 2022 · 14 posts · 6 votes

Good Morning, I'm a new investor and I'm going through the process of obtaining a HELOC. I would like to know what loans are best for me to use when investing in Multi Family units so I won't use up all of the available money from the HELOC. My goal is to invest in 4 Multi Family units in different states on the east coast.

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Austin Steed
Real Estate Agent · Columbus, OH · Member since 2016 · 593 posts · 664 votes
4y

@Brian McGuire

I started with all VA loans and conventional loans. When rates were low this made the most since but now we're focusing on commercial products for most deals, especially cash out Refis. Fannie Freddy really upped the points on a cash out so it makes it more challenging to do a refi in the future.

I’ve bought my 9 duplexes in Columbus OH.

For you I would say get a deal in contract then shop the rates and see what’s best out there. Just keep an eye on those points!

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  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    4y

    Very important is how many units are you talking about. A Multi family property can be 2 units or 200.

    Four or less units is considered a residential. Five units or more is considered commercial and takes a different type of loan. 

    The basic philosophy is get any kind of loan you can where the numbers work. Don’t worry about interest rate. What matters is, do the numbers work. 

    There are lots of financing options. Do some research here to check them out. One of the best right now is DSCR loans (Debt Service Coverage Ratio)

    0Reply
  • Robin SimonBusiness Member
    Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
    4y

    You should consider "DSCR" loans - they are made for investment properties (1-8 units typically) and are easy qualification (no DTI, no income verification, etc) and can allow you to scale the fastest

    [email protected]
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  • Brian McGuire
    OP
    Member since 2022 · 14 posts · 6 votes
    4y

    I appreciate this information, thank you thank you. I’m nervous and excited at the same time.

    0Reply
  • Brittany MinocchiBusiness Member
    Lender · Massillon, OH · Member since 2022 · 1k+ posts · 486 votes
    4y
    Quote from @Brian McGuire:

    Good Morning, I'm a new investor and I'm going through the process of obtaining a HELOC. I would like to know what loans are best for me to use when investing in Multi Family units so I won't use up all of the available money from the HELOC. My goal is to invest in 4 Multi Family units in different states on the east coast.

    Hi Brian!

    If you're talking about 2-4 units, I'd go with conventional for as long as you can qualify. Anything more than 4 units and you're getting into commercial. Once that's not an option, DSCR loans are great. Because they're a higher risk for a lender, rate and terms aren't typically as good as conventional. Your employment, income and DTI are not factored in. The income potential of the property is what qualifies you. There are also no ratio loans, where the DSCR (debt service coverage ratio) isn't as important, but rather your credit, LTV and reserves. Both of those options have prepayment penalties and minimum loan amounts are usually $75k-$150k depending on the lender.


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  • Brian McGuire
    OP
    Member since 2022 · 14 posts · 6 votes
    4y

    Thank you for this information Brittany I appreciate it.

    0Reply
  • Ruchit Patel
    Bay area, CA · Member since 2021 · 383 posts · 306 votes
    4y

    How are you planning to invest out of state? Do you have a team or experience with that?

    0Reply
  • Brian McGuire
    OP
    Member since 2022 · 14 posts · 6 votes
    4y

    Hello Ruchit,
    I do plan to invest out of state as well. My first multi family will be in NJ or PA though. I have a couple real estate agents and friends that have already invested in multi family properties.

    Thanks.

    0Reply
  • Austin Steed
    Real Estate Agent · Columbus, OH · Member since 2016 · 593 posts · 664 votes
    4y

    @Brian McGuire

    I started with all VA loans and conventional loans. When rates were low this made the most since but now we're focusing on commercial products for most deals, especially cash out Refis. Fannie Freddy really upped the points on a cash out so it makes it more challenging to do a refi in the future.

    I’ve bought my 9 duplexes in Columbus OH.

    For you I would say get a deal in contract then shop the rates and see what’s best out there. Just keep an eye on those points!

    2Reply
  • Brian McGuire
    OP
    Member since 2022 · 14 posts · 6 votes
    4y

    Hello Austin,

    I have a VA loan with my current home. I thought we couldn't use a VA loan for more than one home.

    Thanks


    0Reply
  • Joel Allen
    Rental Property Investor · San Antonio, TX (Lender in TX and SC) · Member since 2020 · 196 posts · 253 votes
    4y

    @Brian McGuire

    It's possible to have multiple VA loans simultaneously, depending on several factors (most importantly, your remaining VA loan entitlement). The VA loan must be used to purchase a home that you'll occupy as a primary residence for at least 12 months.

    One option is for you to determine if you have remaining VA loan entitlement. If so, you may be able to purchase another 1-4 unit property (to serve as a new primary residence) using that remaining entitlement, and convert your existing home into a rental (as long as you've lived there for at least a year). That's going to be a slower growth strategy and you won't be able to scale in the same way as other financing options (DSCR, etc). But it's a steady way to kick-start your portfolio with no/low down payment.

    Your VA Loan Certificate of Eligibility (COE) is the definitive way to determine if you have remaining VA loan entitlement. You can either have a lender pull your COE, or you can retrieve it yourself from the VA eBenefits portal.

    0Reply
  • Brian McGuire
    OP
    Member since 2022 · 14 posts · 6 votes
    4y

    Great advice Joel, I appreciate this. Very nervous but I’m ready to get into this.

    0Reply
  • John Acheson
    Renter · Las Vegas, NV · Member since 2018 · 278 posts · 71 votes
    4y

    The best rate loans are SBA 504s/7as at 10% down and below market rate fixed rates!

    The catch is that you need a business,

    need to get into commercial,

    and can only rent out 49%!

    HAPPY to help anyone help small businesses own,

    that signed leases at the top of the cycle!

    0Reply
  • Brian McGuire
    OP
    Member since 2022 · 14 posts · 6 votes
    4y

    Not sure if I’m ready for commercial yet.

    0Reply
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