Tips for the Investor who uses Hard Money Loans
It’s much easier to get a free and clear property loan – If you can pay cash and fix, then apply for the hard money loan to get cash out for the next one or to reimburse credit lines or credit cards.
Always get more than a one year term – you never know when you’ll need to hold a property for more than a year or when a good lease option buyer will come along at a much better profit and long therm capital gains.
Make sure the monthly payment plus taxes and insurance are less than 75% of the rent you’ll be getting.
Look at the total cost of the loan, not just the upfront points and rate. Longer term loans are cheaper even if they cost a little more up front. Tip: I recently had a Realtor client that asked about conventional financing vs private hard money investor loans. The cost in taxes would have been almost $10,000 for her to show enough net income on tax returns to qualify. I showed her how to get a 7 year private loan saving over $4,000 and being able to pay the house off free and clear in seven years with tenant-buyer income.
Conventional Investor Loans
Most banks will only allow four financed properties, you are allowed up to 10 financed properties – If you have a spouse you can double this amount to 20 if you finance your rentals separately in your own name with out the other. And if both of you have verifiable income to qualify, each on your own.
Make sure to put down 25%-30% – there is a big price break at this LTV which will save you 2 points or get you a 1% lower investor loan rate, most banks are not used to investor financing and will not tell you this unless you ask.
Finance your worst properties with conventional loans and try to keep your best ones free and clear. If you ever need some quick cash private lenders will be more likely to fund a great property quicker.
Ask about our new bank statement program for non owner occupied property investors and self-employed business owners. You can now use 24 of your banks statements to show cash flow and income qualify for up to 20 investment property loans without showing tax returns. This is as close to stated income as we are going to get folks!.
Update: August 30, 2015
We now have several stated income real estate investor loans available as well as no personal income loans for rental income property owners and buyers of income houses.
- Stated Income Loans
- No personal income required – approval is based on property rent amount
- Simple No Doc rehab or rental real estate investor loan program
- 10% down 10% interest real estate investor fix and flip lending