I would like to think I’m a good golfer but that would be totally delusional on my part. Cooking is another activity that I enjoy as well as making art. All these activities, on face, seem very incongruent but they do have one particular attribute in common – they all require specialized tools for success. Your success can be constrained by not having the right devices to execute.
With interest rates on the rise, This is why we should consider adding additional tools to our real estate investing toolbox.
Rental finance loans do not use the typical ATR equation. In fact, the real designation is a “business purpose transaction”. The terms for these loans can often look more like commercial than residential loans but they are tailored to finance 1-4 unit single family properties.
Another advantage of these loans is that due to the non-owner occupied, business-use designation, the typical RESPA, TILA, TRID morass of disclosures and timeframes do not apply.
Single Asset Loan
These non-owner occupied loans finance individual rental properties. They can be single family homes, condos or townhome structures. Loans are qualified based on a property’s rental income and not the borrower’s personal debt-to-income ratio. One customer can finance up to 12 individual properties under this program. Loan amounts range from a minimum of $75, 000 to a maximum of $1.2 million. These loans are a great way to address the needs of investors that can’t quite qualify for a traditional GSE sponsored investment loan.
Portfolio Term Loans
This product is designed for the investor who owns more than 5 properties and is looking for loan proceeds between $500,000 and $20 million. Rental properties are grouped into a portfolio and the overall cash flow of the portfolio determines the size of the loan, similar to a multifamily property loan. Proceeds for these loans can be up to 75% of the entire portfolio value, so long as certain debt coverage tests are met. Portfolio term loans can be either recourse or non-recourse to the borrower.
Acquisition Lines of Credit
This product is designed for the investor that pursues either a fix and flip or rental strategy. An acquisition credit line allows the investor to acquire a property and finance a significant portion of the purchase price. Advance rates are typically the lower of 80% of cost or 70% of value. Real estate lines of credit are typically 18-24 months in duration and have different features for entrepreneurial and institutional borrowers.
The Lledon Stokes Group is here for you every step of the way. Allow us to become part of your team, as your preferred real estate advisor. For more information about how The Lledon Stokes Group can help you grow your rental and rehab business send us a message!
Now, if I could only find the right tools to improve my golf game…