Banks consider financing investment properties a riskier loan and will charge a higher interest rate or more points than for a traditional mortgage. If money gets tight and a person has to choose between paying his own mortgage and making the monthly payment on his investment property, he/she is going to keep the roof over his own head every time.Buying real estate for investment is different from getting a mortgage for your own home. Depending on how much you put down and your personal credit rating, expect to pay from 1.5% to 2.5% more than the going rate for owner-occupied mortgages. You should also be prepared to make a much larger down payment than was required for your own home. As a rule, banks will be looking for at least 20% down. That is why the bank is the third choice for financing investment properties. Seller financing is the first choice for Rental PropertiesThe seller financing is for the 10% part of down-payment, when the deal is structured 80% bank mortgage and 10% buyer’ own money. This is a deal I would accept as seller myself.The seller financing will always be cheaper, because the seller will not charge points, PMI or loan origination fees. Seller will be thrilled to get 6% or 7% on a first mortgage. That is lower than you get from the bank.Seller will let me make interest-only payments and a balloon payment in 60 months. You can always prepay the principal with a seller financing.This is an example:When you offer a balloon note with the full payment within 60 months, you have got five years for your investment to appreciate. There is enough time to make sense for a refinance for cash out with a bank before balloon is due. You pay the balloon and make payments for just one commercial mortgage after that.The private lenders are the second choice. These are the people with cash who are losing money in the stock market or making 1% to 2% in certificates of deposit. An investment that returns 7% to 8% with a house as collateral is a better alternative.How to prepare for your loan’ applicationRegardless of who is providing the financing, you will need to put together a loan package that outlines the viability of the investment. “The investment will pay for itself” is what the lender wants to hear.The bank will provide 80% for a good credit applicant. The appraisal of the property will include information on comparable sales in the neighborhood and a rent survey of the area.Application should includes a photograph of the property, a rent survey for a quarter-mile radius, projected income and expenses, and a projected vacancy factor based on the area’ vacancy rate. All the estimates are conservative, because that is how bankers asses risks.That is especially important if you are going to the traditional lending market because the requirements have tightened for banks that sell their mortgages to secondary market Fannie Mae and Freddie Mac.The good news is: Lenders appreciate management skills.The more experience you have in managing rental property, the stronger your application for an investment loan will be. Your level of management experience also determines how much of the rental income they include as your income for the loan application.Get first hand info on this subjects from my “Invest and Manage Properties Successfully” e-book at “Investing Ideas” page.
Tag Archives: finance
Shoe Repairs And Several Other Things When I Was 7
Shoe Repairs And Several Other Things When I Was 7
My Dad repaired most of our shoes believe it or not, I can hardly believe it myself now. With 7 pairs of shoes always needing repairs I think he was quite clever to learn how to “Keep us in shoe Leather” to coin a phrase!
He bought several different sizes of cast iron cobbler’s “lasts”. Last, the old English “Laest” meaning footprint. Lasts were holding devices shaped like a human foot. I have no idea where he would have bought the shoe leather. Only that it was a beautiful creamy, shiny colour and the smell was lovely.
But I do remember our shoes turned upside down on and fitted into these lasts, my Dad cutting the leather around the shape of the shoe, and then hammering nails, into the leather shape. Sometimes we’d feel one or 2 of those nails poking through the insides of our shoes, but our dad always fixed it.
Hiking and Swimming Galas
Dad was a very outdoorsy type, unlike my mother, who was probably too busy indoors. She also enjoyed the peace and quiet when he took us off for the day!
Anyway, he often took us hiking in the mountains where we’d have a picnic of sandwiches and flasks of tea. And more often than not we went by steam train.
We loved poking our heads out of the window until our eyes hurt like mad from a blast of soot blowing back from the engine. But sore, bloodshot eyes never dampened our enthusiasm.
Dad was an avid swimmer and water polo player, and he used to take us to swimming galas, as they were called back then. He often took part in these galas. And again we always travelled by steam train.
Rowing Over To Ireland’s Eye
That’s what we did back then, we had to go by rowboat, the only way to get to Ireland’s eye, which is 15 minutes from mainland Howth. From there we could see Malahide, Lambay Island and Howth Head of course. These days you can take a Round Trip Cruise on a small cruise ship!
But we thoroughly enjoyed rowing and once there we couldn’t wait to climb the rocks, and have a swim. We picnicked and watched the friendly seals doing their thing and showing off.
Not to mention all kinds of birdlife including the Puffin.The Martello Tower was also interesting but a bit dangerous to attempt entering. I’m getting lost in the past as I write, and have to drag myself back to the present.
Fun Outings with The camera Club
Dad was also a very keen amateur photographer, and was a member of a camera Club. There were many Sunday photography outings and along with us came other kids of the members of the club.
And we always had great fun while the adults busied themselves taking photos of everything and anything, it seemed to us. Dad was so serious about his photography that he set up a dark room where he developed and printed his photographs.
All black and white at the time. He and his camera club entered many of their favourites in exhibitions throughout Europe. I’m quite proud to say that many cups and medals were won by Dad. They have been shared amongst all his grandchildren which I find quite special.
He liked taking portraits of us kids too, mostly when we were in a state of untidiness, usually during play. Dad always preferred the natural look of messy hair and clothes in the photos of his children.