Investor Financing for the Purchase and Preservation of Real Estate

Real Estate Investor Financing

Now is a good time to invest in: single-family homes, two- to four-unit buildings, condominiums and townhomes, as well as multi-family apartment buildings. For Real Estate Investors who are operating as a business purchasing residential properties to maintain and benefit from positive cash flow, only limited financing options are available. Now there are programs available to you. For conventional one- to four-unit residential properties, standard conventional guidelines through Fannie Mae and Freddie Mac limit a borrower to having only four financed properties, including the owner-occupied home.

There is a great solution for you. Despite the fact that conventional financing guidelines severely limit who can qualify (and this has only gotten worse in recent years), there has been an increase in portfolio lenders who will lend on residential investment properties with guidelines similar to those of investment financing. commercial apartments. This is great news for those in the business of owning and managing their own portfolio of rental properties. Here are two examples that were often unavailable even a few months ago.

general financing

Like all of the options discussed in this article, this financing is for business entities and not for individual borrowers (sole proprietors). This is to make sure that lenders are not violating any residential lending laws intended to protect consumers as they purchase and finance owner-occupied homes. Inherently, these collaterals must always be occupied by non-owners and used for trading and investment purposes. Understanding this, it is natural that any general mortgage must cover at least five units. Anything less would not be considered a business loan.

What is a general loan?

A blanket loan is when two or more buildings are encumbered and used as collateral for a loan. In other words, a mortgage can cover two properties or a hundred properties against two or a hundred loans. Could you imagine being a small business owner with fifteen or more projects of your own and maintaining that each one has separate loans? Generally, they’re like buildings in relatively close proximity, but that’s not always required. For the entrepreneur looking to buy and hold multiple properties for the long term, the general loan could be an excellent option. Plus, it may actually cost less even though there aren’t many programs available to these small business owners.

Cash Out Refinance with No Seasoning

The term “seasoning” in the world of mortgages means how long an owner has owned the specific property. General guidelines for conventional lenders is that a property must be “seasoned” or owned for at least a year before they will use current learned value against acquisition costs. For example, if the purchase price was $50,000 and the appraised value is $100,000, the maximum loan would be 75% of the purchase price or $32,500. With no preparation requirements, the loan amount would be 75% of $100,000 or $75,000. This allows the investor to buy and hold and earn an immediate profit. This allows the investor to have an immediate return similar to that of a pinball player, but still own the property with all the cash flow benefits. This works on small transactions from $75,000 to multi-million dollar commercial apartment buildings.

General loan without condiments

Finally, there is the possibility of using both strategies simultaneously. This offers entrepreneurs access to cash in their real estate portfolio that they would not have access to with any conventional financing program.

These are just two financing options that can help the small business real estate investor succeed when choosing to own to rent or buy and hold their properties to generate long-term cash flow and capital.