Financing Rental Properties

Hey All,

So, I have some equity in my first property that I’ve owned for 7 years now. Unfortunately, I can only access about 35K of it via Heloc; not enough to pay for another property all cash.

Is the only way to buy rental properties via traditional lenders like wells fargo? Or are there other options, I’d really like to acquire more rental properties and most of the investing articles are for flipping houses.

Any insight would be awesome!


Try going to smaller banks in your area. They should be more flexible. With the big banks, it’s about their program and their numbers. With smaller banks, things are negotiable. I’ve had 100% financing from smaller banks. The bank I’m working with now wants 15% down regardless of purchase price. That’s still not bad. Be prepared for a shorter amortization (my experience has been right around 10 yrs am) and maybe a percent or two higher on interest than an owner occupied property. Make some calls and see who is lending on NOO properties. You might even be able to pick up a couple with that 35k.

Rather than paying all cash for an investment property, it may be a better use of funds to get bank financing. Financing is running between 3.5-5% depending on the terms of the loan and your credit rating. If you pay all cash for a property, you lock up your available cash and are saving only 5% +/- per year (the interest rate you would have been paying).

Imagine instead that you buy two investment properties using the same amount of cash as a 20% down payment. You then finance the remaining 80%. Now you own two income producing properties will no doubt be giving you combined return of greater than 5%.

johnevanmiller is correct.

Bank financing is the good option rather than paying all cash in investment property.

I agree to johnevanmiller. It is the best way of maximizing the productivity of your income-generating property.

It all depends where you are buying and what kind of property it is. Banks don’t like to finance very cheap properties, like under 50k. Mine will do it for me but they charge me 6.25% to do it also. The best rates come on the secondary market and underwriting there is difficult enough to sccrew up a good deal. I just took out a 401k loan to buy my latest and will refinance it to a point where I get all my cash back out and it still cash flows. Hope that works!

I use hard money lenders and private investors… I cannot remember the last time I talked to a bank.

Hello all,

I recently tried to refinance a home I’ve owned since '95. The note balance is under $15k, but my interest is 7.5%. It’s true what they say about larger banks…BOA ran me thru dozens of hoops, in an effort to get cash out on the refinance, but Underwriting finally shot my deal out of the water. They even told me my “FICO Score”, isn’t really the score displayed on “what’s my score?” websites.
After 2 appraisals and lots of aggravation, I just paid cash for an additional property. I still want my cash out, but should I just pay the property off and forget about refinancing or what?

I’m new here and new to REI, but am in the process of buying properties - one financing option that isn’t mentioned above is asking the seller to carry the note, this sometimes is a good way to go if you’re dealing with another investor. I’m in the process of doing this right now and have negotiated good terms - 15% down, 3-year balloon (am over 30 years), 6% interest, no pre-payment penalties. My local bank wanted 20% down, 15 year note, 6.65% interest, pre-payment penalty in first year.

Regarding the FICO being different than what you see on the sites you can check FICO scores - crazy isn’t it? It is different, some other scoring system is used, same with car loans, it’s not the same score!