I recently came on board a real-estate company that deals in short sales, rentals, flips, rehabs, and rent to own, and im very new to real estate.
When we sit down to analyze a potential rental property we always base our mortgage numbers on a 20 year loan. Is 20 years kind of the norm for investors? Obviously the 30 year would increase cash flow at the expense of a longer loan.
I do 30 years just to lock in the rate,you will save a little on the rate with a 20 year, but I just like the flexibility of the 30 year,I can pay more every month, or not depending on cash flow
I do 10 yr loans. 5 yr fixed with an adjustment in the middle of the loan. I like to get them paid off quicker and the bank doesn’t want to hang that money out there on a NOO property for that long. I pay a little higher percentage for a commercial loan. Sure you can get a conventional loan for a longer term, but I have no specific limit to the amount of loans I can have.
You can play the conventional loan game for a while (up to 10 properties) to get the 30-year fixed rate, but eventually you’ll have to go with a commercial/portfolio loan program where the rates will be similar initially, but you generally won’t be able to lock the rate longer than 5 years, as was already stated. After that, the loan rate will float, often at something like 1yr treasury + 3.75%, which is currently around 4% but can potentially spike if rate jump up as many expect (they generally have annual reset limits of 2% and life-time caps of 6% above the initial rate.)
So… using conventional loans for your first deals makes a lot of sense, locking in these low rates forever on buy-and-hold properties. Then turn to a local bank.