Today’s investment landscape for financing a non-owner occupied (rental investment) property can be challenging but with the proper guidance and information an investor can have an overall successful experience. The Great Recession caused a re-evaluation of lending criteria for this asset class as the proverbial “apple cart” got toppled in the late 2000’s and many lending institutions and banks were presented with thousands upon thousands of bad loans and subsequently an inventory of REO properties. Surprisingly, today the good news is financing rental investment properties have become easier than in the recent past. With property values estimated to increase over the next few years this is actually great time to purchase a rental investment property – but you have to be diligent, savvy, and have certain criteria to qualify.
Typical Lending Requirements for Rental Investment Properties
Here are a few things to make the process smoother and easier for an investor looking at purchasing rental investment properties. Most lending institutions have a maximum loan amount of $625,000 and require over 40% down payment. In order to qualify for an investment property loan, an investor needs: 1) landlord experience; 2) strong credit; 3) stable income; and 4) at least twelve months reserves in liquid accounts. Reserves are post-closed assets equaling twelve months of principle, interest, taxes and insurance. Most lending institutions have specific guidelines regarding the conditions of non-owner occupied (rental investment) properties, in case an investor is interested in buying a property which needs major repairs.
Be prepared to provide copies of two months’ worth of your bank statements, investment accounts, and retirement accounts. This means all pages of the statements which are delivered from the financial institution (you can’t just print out statements from the internet). You will need your last two pay stubs covering a 30-day period, your driver’s license, and Social Security card. If you are self-employed, you may be asked for some or all of the following items: 1) business license or occupational license; 2) letter from your CPA establishing two years’ self-employment; 3) your last two year’s tax returns; 4) business bank statements; and 5) business financial statements.
Other People’s Money – Long Term Strategy
Owning investment or rental investment properties is a proven long-term investment strategy. There are many different asset classes to look at when attempting to invest for you and your family’s future. Real estate is that asset class where other people can participate in paying down your debt – which is one of the primary benefits of owning rental investment properties. However, one has to be diligent and consistent in their approach to this strategy. Once a property is selected and purchased hiring a professional property management company to help you is critical to maintain the maximum return on investment.
At Opes Advisors we have some flexibility with these loan amounts and guidelines. We can offer a $2,500,000 loan amount up to 70% of the property’s value, up to $5,000,000 loan amount to 50% of the property’s value. At Opes we have no limit on the amount of financed properties as most lenders will not lend to borrowers with more than four financed rental investment properties.
Bill Prainito is a Loan Manager and Mortgage Advisor with Wells Fargo. Bill works directly with clients to help them analyze their unique financial needs. As a Mortgage Advisor, he researches and presents the best fitting options, explains the details, makes sure that every client is comfortable and well-informed by keeping in close contact throughout the process. Bill is an involved, accessible presence right through closing — ensuring that every stage of the loan process moves smoothly. Email Bill at bprainito@gmail.com or call him at 1.650.464.7813.
David is a licensed real estate attorney, a licensed real estate broker, and has been involved in the real estate business since he graduated from college in 1986.
David currently is the broker/owner of several real estate related businesses which manage and maintain 300+ client properties on the San Francisco Peninsula.
Trust, transparency, and performance guarantees are the foundation of these businesses. David challenges anyone to find a PM professional that offers services similar - extensive education, customer service, and performance guarantees.
David also provides consulting for his clients on property development feasibility, construction, and complex real estate transactions.
David has authored a published law review article, three real estate books, and over 150+ real estate blog articles.
