So you want to be a landlord? Finance it...
See the other posts in this series:
OK...so now you've picked your property niche and analyzed potential properties. Your analysis has told you which property to buy...now comes the hard part... financing it.
It didn't use to be the hard part...but after a couple years of out of control foreclosures and government ownership of banks... financing for investors is hard to come by. But there are still options..
One industry that has done well as banks have stopped lending- is the private equity industry. Many companies have realized there is an unfilled need in the marketplace and have started lending to cash starved investors. Expect large downpayments, 20-30% and higher rates.
Many owners are in a position to finance the sale. Owner financing can take many forms.
Lease Options allow you to rent the property with the option to buy while you sub-rent the property. This is commonly known as a sandwich lease.
Installment Sales, also known as Land Contract or Contract for Deed, is a contract between the seller and buyer in which the buyer makes payments in installments(much like a retail lay-a-way plan). The seller retains title until the debt is paid in full.
Subject to Existing Financing is a non-traditional method of financing in which the existing mortgage stays in place and but the title is transferred to the investor. There are several important points about this form of financing. First, you need to know if the mortgage is fixed or adjustable. Second, the seller is relying on the buyer to hold up their end of the deal by making the payments. The sellers credit can be jeapordized if the buyer defaults.Third, although it rarely happens, the due-on-sale clause in the mortgage agreement can be triggered when the title is transferred to the buyer.
Traditional Mortgage Products
If your only option is a traditional mortgage- don't worry... there are still products available for investors. Begin with your neighborhood community banks. Many of these hold and service their own loans are less constricted by federal regulators. There are also many nationwide programs specifically for investors. If you're going to live in one unit of the property while renting the other units- you can still get owner occupied loan products.
Loan officers and lenders....if you have an investor product that you would like to advertise- please leave the product info and your contact info in the comments section.