My name is Patrick and I am new to bigger pockets, but glad I found it. This post is really me searching for any type of answers of where I should focus my energy in regards to loans. I'm currently in the US Army and stationed in Germany. With that being said, I am currently looking to purchase a rental property in the states. I am not looking to put 20% down with a traditional loan. I do have the option to get a VA loan, but you are required to live in the home, something I am not planning to do. If anyone has any recommendations I would love to hear from you. Thanks in advance.
@Patrick Briscoe Welcome! I'm overseas as well, and have just invested in a rental. About the VA loan: there is a great discussion going on right now about it -- long and short is you DO need to live there.
I did a conventional loan with 20% down. If that's not your game, then maybe there's a way to creatively finance the property. Maybe it's one that you could find a partner on and do a BARRRR -- or get a partner that would be willing to split a 20% down payment with you for half the profits. But, if you don't want want to use your money for a down payment, and you don't plan to live there, you'll probably need to find a partner to finance it.
@Patrick Briscoe a "conventional" loan, a loan governed by Fannie Mae or Freddie Mac (if you recognize those names), can do a 15% down loan on an investment property. Most choose to do 20% but it is possible to do 15% if you needed. Nearly all loan types that have less than 15% down will require you to live in the property. You might find a portfolio loan with a small bank that might lend 10% down on an investment property...but you will be paying for it with a higher rate, or the rate might be adjustable, or the loan might be a 15 year loan which would make your payment higher....and sometimes all three come into play with portfolio loans. The item I would ask for you to think about is that you can buy a duplex with a VA loan, rent out one side, live in the other side, claim your BAH and have the military pay your mortgage. That's what most active duty personnel due when they are in your situation. 0% down on a 2-4 unit property is the absolute best loan you can find. Feel free to ask more questions about this strategy if you need. Thanks!
@Patrick Briscoe you want to start out with the basic conventional loans that comply with the Fannie or Freddie requirements to get the best rates. You can really go to any bank but I suggest working with one who is investor focused so they can help guide you through the process.
@Patrick Briscoe , we bought 3 rentals, while we were stationed in the UK. We just saved up, used extra COLA, BAH and tax-free, combat pay, family separation etc, when we deployed...and did one property at a time. We saved the VA for later, when we were back in the US, and could owner occupy that property.
It is always interesting to see the different perspectives people bring. @Lane Kawaoka are there any national lenders that are investor focused that you would recommend?
@Aaron Lee in general, it is a little harder to find investor friendly national lenders. The bigger the bank the more overlays they will have to limit their investment property exposure. Most investors will teach to work with smaller to mid-sized lenders only. And in general, the closer to the property the better. If you have any state specific lenders you are looking for there are state specific forums here in Bigger Pockets that have a lot of seasoned, local investors that you can lean on for advice. Thanks!
@Aaron Lee there are a bunch out there I use two
@Patrick Briscoe while you are overseas do you have any family (wife kids cousins) who could occupy the house, if the mortgage company shows up, they just tell the truth that you are TDY... On assignment overseas... We used to do these exact mortgage inspections, to make sure the home is owner occupied, I as an inspector would have accepted the answer that the homeowner is overseas on orders in the military...
@Aaron Lee we have used New American Funding for our investment properties. They're a national bank, dont' require us to see anyone in person, and have had great service and luck with them.
I personally established an LLC and got a commercial loan where on some of my rentals I didn't have to put anything down. The bank loaned 85% LTV (appraisal rate) and sometimes my purchases were below 85% of the appraisal so I came in with nothing. Also, they usually close alot faster because they don't have to jump through all the Fannie/Freddie/FHA/VA loan requirements. That being said, terms are different on commercial loan, generally 20yr Ammortization, 3 or 5yr adjustable rate mortgage, and rates are generally 1ish% over the current wall street rate. (if you noticed, the fed just announced rate increases again). However, if I calculate all that and it still makes sense and works, I go for it.
We just closed on a SFR with an FHA loan with 3.5% down in Ohio while serving in Germany.
Expect 15% down minimum (but you'll pay PMI) for a SFR investment property or 25% down for 2-4 units. We have another under contract now and with credit scores over 750 the best rate we've gotten is 5.75%, and still 25% down since it's a duplex. Otherwise, could try to find a portfolio lender.
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