I’ve owned real estate investment properties over the last 20 years and we are pro’s when it comes to financing or refinancing rental properties. Here are strategies that I’ve personally used, that you too may find useful.
Student Rentals
Student rentals are popular in many university cities. But they’re a challenge to finance because of the perceived risk. The good news is we’ve been able to access good financing on student rentals.
Where I’ve seen problems arise is through the appraisal of the property. Lenders are now conditioning appraisals on almost all conventional mortgage loans. Although you may have been pre-approved or approved for the mortgage loan, the student rental property will be an issue with most traditional mortgage lenders. If you’re buying a new student rental be sure to have the appraisal completed upfront. This can prevent last-minute problems on the closing day.
If you own a house that’s a student rental, and it’s a regular home, you can expect to get decent financing with 25-35% equity in the property if you have good credit history, your personal taxes are up-to-date, and you show decent taxable income.
Use the Equity From Your Rental Properties to Pay Off Your Personal Mortgage
You’ll want to check with your accountant first, but you probably have enough equity in your rental properties to pre-pay the mortgage on your own personal residence or perhaps pay off your mortgage in its entirety. You likely have a secured line of credit on your house already that you’ve used to purchase the properties. You don’t necessarily want to pay that off first as it’s a tax write-off.
Buying Another Property if Your Bank Has Already Declined You
Most banks set a limit on how many properties you can finance or don’t see the benefit of their customers owning a property in a holding company. Or you may be self-employed and have a strong, profitable business, but show low taxable income.
My advice is there’s always an opportunity to get decent financing if you have a good net worth and credit. Of course, the mortgage won’t be at a two percent interest rate but if the rental you’re buying cashflows well, you’re still ahead even with a higher rate alternative mortgage.
In all these examples, it’s important to work with a mortgage professional who has first-hand experience in financing multiple properties. Looking beyond just the interest rate we feel is the most important aspect of being successful with your real estate investments. We can help you develop a strategy that will help you save money and build wealth – all you’ll need to do is implement it! If you want to get the conversation started with us today please fill out a form here to get in touch.