Houston, TX · Member since 2017 · 35 posts · 6 votes
Hi all,
I'm a realtor and investor in the Houston area and i currently have 1 rental home which i purchased around 2 years ago. With my ~800 credit score,I was able to secure a conventional investment property 30 year loan via a credit union @ 4.25% interest rate with 25% down and 0 points.
I am ready to purchase my second rental (still searching for the home) but i have been looking at lenders for another investment property loan. With 20% down, the best i have come across is another credit union offering me 5% 30 year conventional 0 points. Its pretty difficult to find good cash flow with such high rate?
At this point, i'm really considering transitioning from renting to just buying a primary residence home and renting rooms since i can get a 3.25% 30 year conv....
Anyone have another lender who they would recommend that can beat this 5% for investment property? Or any other good options to use as loan?
Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
7y
@Daniel A. 5% 30 year fixed is a great rate. Historically that is almost free money. 1% or so in the rate should not kill a deal or you probably didn't have a deal in the first place.
Rental Property Investor · Rosenberg, TX · Member since 2017 · 60 posts · 47 votes
7y
I’m about to close on a deal in a few weeks where I’m putting 20% down, 4.5% fixed for 30 yrs, 0 points and no origination fees. I achieved this by putting lenders against each other that offer $1000 price match guarantees. They also offer the float down lock which will drop my rate another eighth percent should rates drop a quarter which they did last week. Great rates are out there... you just have to find them!
@Huy Thai to me the opportunity cost of putting 20% down seems much higher than getting discount on points and origination fees. Did you try getting the same rate with zero down or lowest possible downpayment (3-5%)? Of course, the ideal scenario will be zero down with no points, no pmi, no origination fees and no escrow.
Rental Property Investor · Rosenberg, TX · Member since 2017 · 60 posts · 47 votes
7y
@Tushar P. I'm not sure there is a product available for investors to put down less than 20% AND have a 30 year fixed. if there is one out there, it would most likely come with PMI fees. I know some banks have in-house products that allow for 10% down but they are ARMs. I've almost maxed out my number of loans with Fannie and noticed they are getting stricter with the more properties that are mortgaged so I'm happy to have gotten the terms I did. If you or anyone knows of a product that can offer all the great terms and less than 20% I'd love to hear it!
Real Estate Broker/Owner & Property Manager · Sugar Land, TX · Member since 2013 · 660 posts · 459 votes
7y
@Huy Thai You are absolutely. In my 10+ years, I never seen a product without min. 20% down for investment properties without any fees. There are portfolio loans without 20% down but still it based on your appraisal and fees are high.. You gotta invest something to reap the rewards. Nobody is going to give you money free of cost.
There are banks which will not only give you money for free, but also pay you for borrowing money. Not yet in the US, unfortunately. Will it be surprising if big global companies borrow from European banks with negative interest rates and deploy the capital into their “global” portfolio?
For individual investors in the US, can we hope for that once the recession is in full swing (assuming a republican govt and a full-scale trade war)?
The best I could find for a real estate loan is 4.2% APR with 3% down and no pmi. Big banks are doing that, and they may be willing to negotiate on points and origination fees but not escrow waiver. But I'm not sure if that is possible if someone has already maxed out the number of loans.
Rental Property Investor · Houston, TX · Member since 2017 · 5 posts · 0 votes
7y
For individual investors in the US, can we hope for that once the recession is in full swing (assuming a republican govt and a full-scale trade war)??????
Could you please enlighten us on your area of expertise to make a statement such as this. I’m assuming by your confidence you have multiple doctorates in economics and have been working in the field of economics for well over 40 years to make such a statement. You’ve probably seen multiple cycles throughout your life, right?
That or you are making a political statement or a just taking a guess. Because the reality is that no-one knows what will happen post election. I think we can safely guess what will happen if one of the socialist candidates were to take office. But that’s as good of a guess as anyone has. Sorry, sometimes the written word loses tone.
Investor · Cypress, TX · Member since 2015 · 143 posts · 144 votes
7y
I would much rather buy with hard/private money and then refi than put 20% down. Would be extremely hard to rapidly build a portfolio having to put 20% down on everything. Yes, you'll pay a little extra for refi fees and such, but that is much smaller concern than all that dead capital out on the street. If I had 100K cash, I would much rather buy 12-15 houses than only 4-5 by putting 20% down. Thats how you build a portfolio, not nitpicking an interest rate that you're not even paying (tenant is paying it). I'll gladly take a little higher rate for no cash out of pocket. I refi my rentals around 6% for 30yr fixed, but I have ZERO out of pocket 95% of the time.
@Jarrod Whitfield if you noticed, it was a question, though I only had one question mark after the sentence instead of six 😉
@Chris Hopper I’m trying to do the same - lowest/zero downpayment is the primary criteria and then I see if I can get other expenses as low as possible. What is your source for zero down - hard money lenders, credit unions, banks?
Investor · Cypress, TX · Member since 2015 · 143 posts · 144 votes
6y
@Tushar P. I have a couple hard money lenders and some private money that I use. Pretty much everything I buy is zero out of pocket. 2-4K is max I usually every have to come out of pocket.
I would much rather buy with hard/private money and then refi than put 20% down. Would be extremely hard to rapidly build a portfolio having to put 20% down on everything. Yes, you'll pay a little extra for refi fees and such, but that is much smaller concern than all that dead capital out on the street. If I had 100K cash, I would much rather buy 12-15 houses than only 4-5 by putting 20% down. Thats how you build a portfolio, not nitpicking an interest rate that you're not even paying (tenant is paying it). I'll gladly take a little higher rate for no cash out of pocket. I refi my rentals around 6% for 30yr fixed, but I have ZERO out of pocket 95% of the time.
This makes a lot of sense. When you use hard/private money, is the house usually a turnkey or heavy rehab? I would assume heavy/medium rehab to sell the the hard money lender that money can be made on this deal. I guess where I am going with this is, can you get a hard money lender to buy you a turnkey with very minor rehab?
Real Estate Broker/Owner & Property Manager · Sugar Land, TX · Member since 2013 · 660 posts · 459 votes
6y
@Parteek G. You can but why? You will be wasting lot of money in closing cost. Even if you do want to, they can only lend for 65-70% of the ARV. If the numbers work, they don't care as long they make money.
Investor · Cypress, TX · Member since 2015 · 143 posts · 144 votes
6y
@Parteek G., I can buy whatever I want with my lenders - rehab or full turnkey. I've done both. I get 75%, so I'm pretty much always zero out of pocket. Usually by the time I refi (6-8mos) I still don't have to come out of pocket for that. The times I do, it's less than 3K for closing costs and such. I'll take that all day long!