Financing When Buying a Rental Property
Are you considering purchasing your first or maybe even second rental property? In this blog, we’ll discuss extremely useful information shared with us by, Tom Mihalik of Best Interest Mortgage, that can help you tremendously when financing your investment property.
What You Can Expect
For individuals looking to finance a rental property, you’re going to want to ask about investor financing. Mihalik shared with us that they offer both fixed and adjustable rates that can go up to an 80% loan to value, which requires at least a 20% down payment. Although 80% is offered, the rates are much more attractive for investors if they put down 25-30%. Like most major purchases, your credit score is critical for the type of loan you qualify for.
Kim Reed, Owner of Reed Property Management, cleared the air about financing investment condos, “There are rumors circulating about investment condos needing a higher down payment, is that true?” Mihalik responded, “No, it’s standard financing across the board, 20% down is required.”
If you’re the owner of an investment property, you might want/need to rehabilitate (rehab) the existing state of the property… This is when to consider a rehab loan. A rehab loan is when you purchase a home at the contracted price, then any addition that you want to do to the home, such as…
- Remodeling the kitchen
- Repurposing a room
- Installing new flooring
- Adding a pool
- Putting a new roof on
is added onto the total end loan. As long as you get a licensed contractor bid, then submit that with your purchase offer, a lender will combine the purchase offer plus the projected price of the improvement and will lend off the after fix-up value. For example, if you purchase a home for $200,000, and the projected renovation cost is $50,000. They can then finance 80% of the $250,000 total purchase price. This is a far more convenient option instead of financing $200,000 and coming up with $50,000 out of pocket, or taking out a separate $50,000 loan.
What We Offer
A big thank you to Tom Mihalik of Best Interest Mortgage for a lot of priceless information that many property investors could really benefit from.
If you’re in the process of purchasing a rental property, give Reed Property Management a call! We’ll handle property inspections, rent collection, maintenance requests, background checks, security deposits and much more.