Investment Property Financing
What you need to know when obtaining a loan for a non-owner occupied home:
Purchase money financing for residential real estate for investors remains readily available and extremely competitive. Investors, however, must be well qualified with good credit, “documentable” income, and ample liquidity. The best rates and terms are available for those willing to make a down payment equal to 25% of the purchase price. Financing that requires only 20% remains available as well, but 20% down payment loans have interest rates that are approximately ¼ of a percent higher than 25% down payment loans.
Investors often do NOT usually need “landlord” experience, or a “history” of managing rental properties, as many believe. Investors can even be “first time homebuyers”.
For buyers with ample liquidity but insufficient “documentable” income, there are “hard money” options available. “Hard money” loans, however, require as much as 30% down and cost as much as 5 points, and they usually have interest rates in excess of 10% with “interest only” payments.
Closing Costs and Cash to Close:
Non-recurring closing costs include Title Insurance, Escrow Fee, Appraisal Fee, Lender/Underwriting Fees, Processing Fee, and other standard fees associated with the purchase of residential real estate in California. Non-recurring costs for a “no points” loan are typically in the $5,000 to $6,000 range. The total “out of pocket” investment required for a $250,000 purchase, for example, with a 20% down payment could be as much as $60,000. This includes the down payment, the non-recurring closing costs, and the prepaid interest, property taxes and insurance.
Cash Flow & ROI:
The recent decline in the housing market may provide an excellent opportunity for those looking for a long term investment or additional monthly income. Determining the potential monthly rent and expenses is important in such transactions. The experts at JVM can assist with your analysis of a rental property as an investment option.
Real Estate Broker, CA Bureau of Real Estate, BRE# 01524255, NMLS# 335646
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