What Every Investor Needs to Know about Loans for Rental Property

Discover the 4 main sources of investor loans for rental property; Conventional, Local Banks / Credit Unions, Non QM Lenders and Portfolio Lenders. In this training, you'll learn which ones to use, when, as well as tips and tricks on how to maximize your experience with each. This is a MUST watch for any real estate investor who owns (or plans to own) residential rental property.

 

Portfolio Lenders

Portfolio lenders are the most investor friendly options for originating long term fixed rate loans on rental property. The first on the list is my favorite:

Finance of America Commercial
: My contact at FOA Commercial is Gerry Collins (Phone: 224-221-2137 Email: gerald.collins@financeofamerica.com). If you speak with him, you can name drop me, if you would like.

Others in this vertical include:

 

Non-QM Lenders

While you'll need to connect with a Mortgage Broker in order to obtain a loan from a Non-QM lender, here are the leaders in this space:

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Comments

  1. Hi Phil, Thanks for your insightful video. I am looking for investment funding for a community development project. I will be selling apartment units. The proposed projection for development is $300k. I have good credit a business account of over 14 years but no money is currently in it and a small savings and land I would not mind using as leverage. However I would like to obtain a loan based on the project estimated revenue. Can you offer any advice on which way is up?
    Thank you kindly

    • Phil Pustejovsky says

      Almost every lender is going to require a down payment from you. If you borrowed against your other real estate holdings, that may suffice for a down payment.

  2. Thank you for an insightful video. Can I qualify for those loans as an foreigner.

    • Phil Pustejovsky says

      I don’t know but if you do enough research on the different lending options that exist out there, you’ll probably find a few that can help you. I haven’t taken the time to research what is available for non-US citizens.

    • Yes, you can get a foreign national loan in the US. But you have to have an ITIN (for tax purposes).

      I got three loans as a foreign national and did last year my refinance of all of my properties as well. So go for it!

    • Steve Walczak says

      https://www.foacommercial.com/single-rental-loans:

      Foreign Nationals allowed (60% LTV max, eligible countries only)
      Interest-only payments
      30-year property loan terms
      Minimum 660 FICO

  3. Phil I bought a property subject to under my LLC but have not pay the $800 for 3 years. Is this going to be a problem with me if I where to sell the property. I am selling house. If you know any student. Let me know

    advice

    • Phil Pustejovsky says

      Go pay the $800 per year LLC fee to catch it up first. You won’t be able to sell it until your LLC is in good standing

  4. Phil – You are correct on conventional that you cannot buy in your LLC, but they now allow you to transfer it into your LLC (see Fannie Mae servicing guidelines below.) I am still researching the title insurance, property insurance, and Deed recording barriers that you mentioned.

    Fannie Mae Servicing Guidelines: D1-4.1-02: Allowable Exemptions Due to the Type of Transfer (11/08/2017)
    “Unless the previous borrower requests a release of liability, the servicer must process the following exempt transactions without reviewing or approving the terms of the transfer:…
    “A transfer of the property (or, if the borrower is an inter vivos revocable trust, a transfer of a beneficial interest in the trust) to”…
    “a limited liability company (LLC), provided that
    • the mortgage loan was purchased or securitized by Fannie Mae on or after June 1, 2016, and the LLC is controlled by the original borrower or the original borrower owns a majority interest in the LLC, and if the transfer results in a permitted change of occupancy type to an investment property, such change does not violate the security instrument (for example, the 12 month occupancy requirement for a principal residence).
    Note: The servicer must notify the borrower that a property transferred to an LLC must be transferred back to a natural person prior to any subsequent refinance application in order to meet Fannie Mae’s Selling Guide underwriting requirements.”

    • Phil Pustejovsky says

      You reminded me of another problem; it has to be transferred back into the natural person’s name to do another refinance just like it.

  5. Thanks Phil.. I appreciate you.
    I am trying to buy my first rental property as an investor.

  6. Unfortunately in Canada we can’t get loans for terms of more than 5 years (even if amortization is 30 years) 🙂 So you can count on a fixed rate for 5 years, but it can be a crap shoot after that. We just bought our first rental property. What we got: 5 year term, 30 yr amortization, bought in personal name, 1.85 interest calculated twice per year, adjustable. I was surprised at how “tentative” our lenders were (even though we could have paid for the property in cash). What I’m wondering, is should we simply increase payment schedule to increase our equity?

    • Phil Pustejovsky says

      Sorry, but I can’t help you with Canadian rental property loans. In the US, our rates can stay fixed for 30 years, which makes leverage so wise on rental property. With your 5 year interest adjustment, it changes the equation. You may have to have a lower LTV (and therefore higher equity position) if you are going to borrow against rental property in Canada.

  7. Roger walker says

    If I own my property why would I mortgage it.

  8. Keith Chatting says

    Phil: I still do not understand why having rental property free and clear is not preferred. in my mind, owning the property outright presents many options. The renting minus operating expenses provides more net cash flow and profit. If cash is needed, then you can borrow against it to make more investments.

  9. Robert Cruz says

    Hey I think I understood I should buy my one family house 1st to get the 1st buyer options then get Equity from it to buy a rental property. Is that correct? I’m looking to buy for the first time & don’t know which way to start or go. Any input would be Appreciated..
    Thanks

    • Phil Pustejovsky says

      You can start with any of the lending options, even if it is your first deal. If you can successfully qualify for Conventional, then go the Local Bank / Credit Union route.

  10. I want to join your apprenticeship how do I sign up

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