what’s the best way to finance a 2-3 family rental NON-owner-occupied?
little or no money to put down. good credit. goal is cash-flow. i own one property now (3 fam owner oc)
TIA
The best financing depends on your exit strategy for the property. How long do you plan to hold it? If you only plan on holding it for 2-5 years, than an ARM loan would probably be your best option, as they are usually lower than fixed loans. If you plan on holding it longer than that, though, and also expect the interest rates to continue to rise substantially then an ARM wouldn’t be the best way to go, and a conventional 30 year mortgage would be.
HOWEVER, it’s next to impossible to acquire investment property via a bank loan with no money down (They’ll usually require 20%). If you have enough equity in your current property perhaps you can use that as the security. If no bank will touch you, then goto a Mortgage Broker. If no Mortgage Broker will, then goto a Hard Money Lender (check your yellow pages). You’ll pay a few points over prime for a hard money lender, but if the property is a great deal then perhaps it still makes financial sense.
thanks for the reply
i am definately interested in using my equity from the first property as security, as i am looking to buy and hold.
i bought the house 6 months ago and only put 9k down, but i have increased the income from 27k/yr to 40k/yr. i bought it from 270k, but i think that after the improvements and income increase, it will appraise around 320k. i want to spend about 200k on a 2 fam and i think i can work 100% financing on something of that price if i try a blanket mortgage using my equity. think that’ll work?
200k on only a 2 family? God that’s a lot of money but you know best your financial situation and the local rent situation in your area. I certainly hope the structure itself is in pristine condition and shouldn’t need any major (or even minor for that price) work in the next 5 years.
A blanket mortgage will work, but remember that with a blanket mortgage if you do hit a period of financial crisis (softening rental market, lose your job, etc) and find yourself unable to make the mortgage payment, you stand to lose all properties beneath the mortgage as opposed to individual mortgages on each property.
There’s also something called “Seasoning” that banks routinely utilize. Essentially seasoning means the time it takes for a property to estabilish an income level, usually about a year. Until a property has been “seasoned” a bank will consider it’s value at the original purchase price of $270,000 in all liklihood. Perhaps your bank only requires a 6 month seasoning time, however, although it’s unlikely. From my experience it’s difficult to get a bank to lend against an unseasoned property no matter how much it may be taking in currently.
in that case, a blanket won’t work until next february… too late.
what if i can have the house appraised and have the seller carry a note on my current property?
or, what if i can find a good deal, and buy the house for 75% of its apraised value? would i be able to get a bank to give me 75% LTV, which would actually be 100% financing?
what if i can find a good deal, and buy the house for 75% of its apraised value? would i be able to get a bank to give me 75% LTV, which would actually be 100% financing?
Nice thought! However, a purchase loan is 100% of the purchase price or appraised value whichever is lower.
are there other types of loans, other than purchase loans, that will allow finacing based on an apraisal?