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You might think it’s difficult to finance a rental property, let alone an entire portfolio. The truth is, if you’re willing to think outside the box, a little creativity goes a long way. In this video, we’re going to cover multiple creative ways you can finance a rental property.
If you go to the bank for a conventional loan on an investment property, you can expect stricter lending standards, costlier down payments, and higher mortgage rates than you might see on a standard primary residence mortgage. It’s important to note that depending on the type of property you’re buying, conventional loans will require a down payment around 15%-25%. However, if you’ve got the funds and the credit, a conventional loan can be a great fit for you.
In fact, a conventional loan is one of my favorite methods for buying a property. Let’s be honest… rates are freaking low right now. Lower than I’ve ever seen them. We had a client lock in a 30 year loan last week at 2.85%…
2.85% that’s like free money.
Another option to consider is an FHA loan. If you don’t have access to a down payment, loans backed by the Federal Housing Administration (FHA) might be right for you. The credit score and down payment requirements for an FHA loan are lower than conventional loans. The only drawback is that an FHA loan requires that you live in the property for a minimum of one year.
If you happen to be active duty military or a veteran, consider looking into VA (US Dept. of Veteran Affairs) loans. These loans offer no down payment requirement, nor do they require a minimum credit score. Qualifying member can use a VA loan to buy multifamily investments, provided that they live in one of the units. If you’re interested in learning more, please watch my video on military house hacking with Mike Foster of Active Duty Passive Income: http://bit.ly/2tmYPTG
Let’s talk about alternative financing options. If you’ve been around a while, you’ve heard me talk about a company called Fund&Grow. Fund&Grow helps you obtain business credit cards at 0% introductory interest. You can learn more and save $500 off your signup fee by visiting https://morrisinvest.com/funding. This is one of my favorite strategies, and a great way to get started as a real estate investor.
Have you heard about non-recourse financing? This is a loan that is tied to the investment property itself. This type of loan is in the borrower’s name and is secured by collateral. The down payments are closer to 35-40% down. The interest rate can also be higher, but remember this is not tied to your personal name. Since conventional financing limits you to ten properties, additional resources such as non-recourse financing can be useful. Another benefit of non-recourse financing is that it must be held in an LLC.
DISCLAIMER: I am not a financial adviser. I only express my opinion based on my experience. Your experience may be different. These videos are for educational and inspirational purposes only. Investing of any kind involves risk. While it is possible to minimize risk, your investments are solely your responsibility. It is imperative that you conduct your own research. There is no guarantee of gains or losses on investments.
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