Board Topic: best financing for rental property
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best financing for rental property

Posted by: paul Feb 19 2004, 09:48 PM
I recently bought a rental sfh for 40K. The property appraises at 60K. The local bank financed it for me, no money down, but they only financed it for 5 years. The property has tenants that have been there for a year and a half and plan to stay until I say different.
Is there another lender that will take on this note for a longer term to help the cashflow?

Posted by: loanuniverse Feb 20 2004, 09:35 AM
The quick answer is yes. Specially if the property has appraised at $60,000 and only has a $40,000 loan. This would mean a 67% loan-to-value. Some thoughts:

1- You said the bank financed it for 5 years. Did you mean that the amortization is five years or did you mean that the maturity is five years? If the amortization is longer the benefits of refinancing might not be as good.

2- There is a possibility that the loan might qualify for some type of residential financing. I am not a residential lender, but it is an option worth exploring.

3- When talking about small amounts like this, the amount of fees that you pay will greatly influence the choices that you make. A $2,000 closing fee in a $100,000 loan is only 2%. In your case is 5%.

4- You have a couple of things going for you. First, you already have the property, and you have seasoned tenants. This means that you can afford the time to shop around. ”it is not as if you need the money for a purchase by the end of the month”

let me stop… I could go on and on… but I might as well address your question:

If I were on your place I would go to at least two or three banks and present my case and ask them what they could do for me. A good lender will try to fit your request into one of his products that meets at least some of your wants. You just got to be straight with the person that you speak to as to what it is that you are trying to accomplish and provide him with as much information as possible. As an analyst, there is no such thing as too much information.

Hope this helps.

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