Many of our clients would not use private money financing for their rental properties, except when they already own more than ten properties that are financed, including their primary residence. At the moment, Fannie Mae and Freddie Mac only allow up to 10 properties financed by one borrower. This means that rental property investors need to seek other sources of financing for new additions to their rental portfolio.
One avenue to take is private money financing, like this loan that FCTD closed for our client in Southern California. The benefit of the private money loan is the speed of closing, which can be completed in 1-2 weeks.
Another path to go down is a community bank or credit union, which offer similar 5-year fixed rate loans, and which have slightly lower interest rates and slightly lower closing costs. Community banks and credit unions usually take 30-45 days to close the loan. Which may be too long for experienced investors sourcing undervalued properties where closing within 7-14 days makes the difference in their offer being accepted versus losing out to another competing offer.
This loan worked out well for our client who was able to close quickly and received a relatively low interest rate of 6.25% fixed for five years.
5-Year Rental Property Loan Terms:
- $150,000 Loan Amount
- 6.225% Interest-Only
- 60-Month Term
- Sliding Scale Prepayment Penalty During the First 3 Years
- Loan Closed in 10 Days from Start to Finish